Accounting Information Systems ASA

ACCT 406
Accounting Information Systems
Dr Aboagye Otchere & Dr Edward Nartey

Introduction
Overview of Accounting Information Systems

Learning Objectives/Outcomes
After this lecture, you should be able to:

o Describe the nature of information and its flow in an
organization
o Identify the types of systems and their subsystems
o Describe a framework for AIS in relation to the larger
information system (IS)
o Understand the contextual dimensions of AIS
Slide 4
Learning Objctive 1
Describe the nature of information and its flows

in an organization
eacc606_teddyok_MgtAcct&Strategy_EMBA Slide 5
Overview of AIS
o This lecture places the course “Accounting

Information Systems” in perspective for accounting
professionals.
o It is divided into various sections, each dealing with a
different aspect of information systems.
Slide 6
Primary Information Flows within the
Business Environment
o Information is a business resource and vital to the survival
of the contemporary business organization.
o Information is needed for both internal and external
organizational decisions
o Levels of management manage the product-oriented work
of the organization:
- Operational level
- Middle (tactical) level
- Top (strategic) level
Slide 7
Internal and External Flows of Information
Slide 8
Information Qualities
Various levels of management requires different attributes of accounting information in
making informed decisions. These are summarized below:
The Nature of Information
o Information is processed data:

- Meaningful and useful for decision making purposes.
- Should be devoid of overload.
o Data are facts that are recorded and stored.
- Insufficient for decision making.
Slide 10
Value of Information
o Benefit less cost

o Benefits include:
- Reduced uncertainty
- Improved decisions, and
- Improved ability to plan and schedule activities.
o The costs include:
- Time and resources spent to produce and distribute the
information.
o Information costs and benefits can be difficult to quantify, and it is
difficult to determine the value of information before it has been
produced and utilized.
o Nevertheless, the expected value of information should be
calculated as effectively as possible so that the costs of producing
the information do not exceed its benefits.
Slide 11
Value of Information
Benefits Costs
o Reduce Uncertainty
o Improve Decisions o Time & Resources
o Improve Planning
o Improve Scheduling – Produce Information
– Distribute Information
Slide 12
What Makes Information Useful?
o Relevance
o Reliability
o Completeness
o Timeliness
o Understandability
o Verifiability
o Accessibility
Slide 13
Information and Decisions
The two main users of accounting information?
The main users of accounting information are classed under two main categories namely, internal and external users.
 Example of external users include Stockholders ,Investors, Creditors, Governmental agencies, Customers and vendors
 Example of internal users include Managers at different levels in the organization, and employees.
 The use of accounting information by these groups are depicted in the diagram below.
Example of External users:

 Stockholders
 Investors
 Creditors
 Governmental agencies
 Customers and vendors
Example of Internal
users:
 Managers at
different levels in
the organization
 employees
Learning Objective 2
Identify the types of systems and heir

subsystems
Types of Information Systems
» The following are the general types of information
systems used by business organizations
» Electronic Data Processing Systems (EDP)

» Data Processing Systems (DP)
» Management Information Systems (MIS)
» Decision Support Systems (DSS)
» Expert Systems (ES)
» Executive Information Systems (EIS)
» Accounting Information Systems (AIS)
Slide 16
Systems and Subsystems
What is a system?
o A group of two or more interrelated components or
subsystems that serve a common purpose
o A system must have:
- Multiple components
- Relatedness/Interaction
Slide 17
Elements of a System
o Purpose/goal
- Goal conflict: occurs when components act in their own
interest with no regard to overall goal
- Goal congruence: occurs when components acting in their
own interest contribute toward overall goal
Processed
Goal
Processed
Slide 18
System Thinking
o Is ‘a study of organizations and relationships.

o A set of principles that can be used to understand complex entities
o A socially created mechanisms through which symbolic forms of
knowledge are created
o A symbolic forms of knowledge concerning’… temporal and spatial
displacement of resources
o Two main categories of system thinking
- Hard system thinking
- Soft system thinking
o Distinction based on two criteria
- objective/subjective (ontological dimension)
- Stable/unstable (contextual dimension)
Slide 19
Hard System Thinking
o Systems are structured as mechanistic, functional

and objective oriented
o Can be described with formal notation
o Can be understood with rational analysis
o Can be modelled using quantitative techniques
Problem
o Hard systems thinking cannot take into account
qualitative characteristics
Slide 20
Soft System Thinking
o Systems are organic, humanistic and subjective

o They are behavioral in context
o Problem
- Cannot be described with formal notation
- Cannot be modelled using quantitative
techniques
Slide 21
Categorization of System by Nature
o An open system:
- Is a system that is interactive with the environment, exchanging
information, energy and/or raw materials for information,
goods and/or services produced by the system.
- It is generally self-regulating, and capable of growth,
development, and more importantly, adaptation.
o A closed system:
- Is a system that does not interact with the environment.
- Fixed and often automatic relationships exist between system
components.
- It is generally incapable of growth, or any form of
development/adaptation, and as such possesses limited life
Slide 22
Categorization by Type
o Static system
o Dynamic system
o Continuous system
o Abstract system
o Natural system
o Constructed/artificial system
Slide 23
System Decomposition & Interdependency
o System decomposition:
- The process of dividing the system into smaller subsystem
parts
- Convenient way of representing, viewing and understanding
the relationships among subsystems
o System interdependency
- A system’s ability to achieve its goal depends on the effective
functioning and harmonious interaction of its subsystem
- If a vital subsystem fails or becomes defective and can no
longer meet its specific objective, the overall system will fail to
meet its objective
o Information system designers need to identify critical
subsystems, anticipate the risk of their failure, and design cost-
effective control procedures to mitigate the risk
Slide 24
Information Systems
• A System is an entity consisting of interacting parts or components aimed at a common goal.
• A system is called a subsystem when it is viewed as a component of a larger system.
• A subsystem is considered a system when it is the focus of attention.
• An information system is the set of interrelated sub systems by which data are collected,
processed into information, and distributed to users for purposes of planning, decision
making and control
• Goal conflict occurs when a subsystem’s goals are inconsistent with the goals of another
subsystem or with the system as a whole.
• Goal congruence occurs when a subsystem achieves its goals while contributing to the
organization’s overall goal.
The term information systems suggests the use of information

technology (IT) in an organization to provide information to users.
Hardware and
Software Data Information
Describe a framework for the AIS in relation to

information system
Accounting Information System &
Management Information System
o An IS consists of a set of formal procedures by which data are
collected, processed into information, and distributed to users
o But two broad classes of IS include the MIS and AIS
- MIS and AIS are often distinguished. However, their
functions are often integrated to achieve operational
efficiency
- The distinction between MIS and AIS centers on the
transaction concept which is highly regulated by the SOX.
E.g.. Every business organization is legally bound to
correctly process transactions involving sales, purchases
and cash disbursements
- In the AIS inputs called transactions are accepted and are
converted through various processes into output
information that goes to users
Slide 27
The Information System Framework
» Because of the highly integrative nature of modern

information systems, managers and auditors need a
conceptual view of the information system that distinguishes
key processes and areas of risk and legal responsibility from
the other (non-legally binding) aspects of the system.
» SOX legislation requires that management design and
implement internal controls over the entire financial reporting
process.
» This includes the financial reporting system, the general
ledger system, and the transactions processing systems that
supply data for financial reporting.
» Without such a model, critical management and audit
responsibilities under SOX may not be met.
Slide 28
Types of Information Systems cont.
Examples of MIS application in Functional
Areas
o Finance – portfolio management systems, capital
budgeting systems
o Marketing – market analysis, new product
development, product analysis
o Distribution – warehouse organization and
scheduling, delivery scheduling, vehicle loading and
allocation models
o Personnel – human resource management systems,
job skill tracking system, employee's benefits system
Slide 30
AIS DEFINED
» AIS:
– is a collection of resources designed to transform data into information

– It involves the collection, processing, storing, and reporting data and
information
– a unified structure for the processing and conversion of economic data
into accounting information.
» An AIS can be a paper-and-pencil manual system, a complex system

using the latest in IT, or something in between. Regardless of the
approach taken, the process is the same.
» The AIS must collect, enter, process, store, and report data and
information.
» The paper and pencil or the computer hardware and software are
merely the tools used to produce the information.
Slide 31
Accounting and AIS
» Accounting:
– a language of business
– center of information for decision making
– Links all organizational activities
» So, AIS = information providing vehicle

» Accounting = AIS
» “It has often been said that accounting is the language of business. If that
is the case, then an accounting information system (AIS) is the
intelligence—the information-providing vehicle— of that language.”
» By definition, accounting is inherently regarded an information system,

since an AIS collects, records, stores, and processes accounting and other
data to produce information for decision makers.
Slide 32
Components of AIS
Six main components namely;
o Operators (People using the system)
o Manual/automated procedures and instructions for
collecting, processing and storing data
o Data about the organization and its business processes
o Software used to process the data collected and generate
information
o Information technology infrastructure: computers,
peripherals, networks etc.
o Internal control and security to safeguard the system and
its data.
Slide 33
What is a Transaction?
» A transaction is an event that affects or is of interest to the
organization and is processed by its information system as a
unit of work
» A transaction can be financial or non-financial:
- A financial transaction is an economic event that affects
the assets and equities of an organization, is reflected in its
accounts, and is measured in monetary terms
- Non-financial transactions are events that do not meet the
narrow definition of a financial transaction but needs to be
processed by the AIS as a transaction. E.g. adding a new
supplier of raw materials to the list of valid suppliers
Slide 34
Transactions Processed by the
Information System
Slide 35
Elements of the AIS Function
o The AIS is composed of 3 major subsystems
- The transaction processing system (TPS) which supports daily
business operations with numerous reports, documents and
messages for users throughout the organization
- The general ledger/financial reporting system (GL/FRS) which
produces the traditional financial statements, such as the
income statement, statement of financial position, statement
of cash flows, tax returns, and other reports required by law
- The management reporting systems (MRS) which produces
internal management with special purpose financial reports
and information needed for decision making such as budgets,
variance reports, and responsibility reports.
Slide 36
A General Framework for AIS
Slide 37
Elements of the AIS General Model
The model describes all information systems regardless
of their technological architecture
o End Uses
o Data sources
o Data collection
o Data processing
o Database management
o Information generation
o Feedback
Slide 38
Functions of AIS
o AIS generally possess two related functions:
- A decision-facilitating function
- A decision-mediating function
o As a decision facilitation function, it is concerned with
the provision of
- Financial accounting information (structured and
transaction oriented)
- Management accounting information (unstructured
and decision oriented)
- Financial management information (unstructured and
financial/wealth oriented)
Slide 39
Decision-Facilitating Function
o As a decision-mediating function, AIS is concerned
with:
- Sustaining and reinforcing organizational
operations (transaction processing)
- Supporting decision making (information
management)
- Discharging stewardship obligations (internal
control)
- Fulfilling legal, social and political responsibilities
(external control)
Slide 40
Contemporary Issues of AIS
» AIS and Valued ADDED
» AIS can add value to business processes in the following manner:
– AIS Improves Quality and Reduces Costs: e.g. reduces the amount of
wasted materials and the cost of having to rework everything again
– AIS Improves Efficiency: by providing more timely information
– AIS Improve Knowledge Sharing: improving operations and even
providing a competitive edge.
– AIS Improve Supply Chain: e.g. integrating AIS into ERP can reduce cost
of sales.
– AIS Improves Decision Making: AIS
Identifies situations requiring management action
– AIS improves internal control: AIS
can protect systems from problems such as fraud, errors
etc Slide 41
AIS and Decision Making
AIS and Decision Making
AIS improves decision making in the following manner
– Identify situations that require action.

– Provide alternative choices.
– Reduce uncertainty.
– Provide feedback on previous decisions.
– Provide accurate and timely information.
Slide 42
AIS and Value Chain
o Value Chain includes the set of activities a product or

service moves along before as output, it is sold to a
customer
o At each activity the product or service gains value
o They include primary activities and support activities
Slide 43
VALUE CHAIN—PRIMARY ACTIVITIES
Inbound Outbound
Operations Marketing/Sales Service
Logistics Logistics
VALUE CHAIN—PRIMARY ACTIVITIES
Cont
o Inbound logistics: it involves receiving, storing and
distributing materials that an organization uses to create
services to sell
o Operations: it involves activities that transforms input
into final product or services
o Outbound logistics: it entails the distribution of finished
goods to customers
o Marketing/sales: promote sales (advertising and
customer services)
o Services: after sales service and customer maintenance
Slide 45
VALUE CHAIN—SUPPORT ACTIVITIES
• Support activities in the value chain augments the primary activities.

• They encompass firm infrastructure, human resources, technology, and
purchasing
Firm
Infrastructure Technology
Human Purchasing
Resources
VALUE CHAIN—SUPPORT ACTIVITIES
Cont
o Firm infrastructure: includes the accounting, finance,
legal and general administrative activities that allow an
organization to function
o Human resources: includes recruiting, training, benefits
and compensation
o Technology: includes research and Dev., IT, Website, etc.
o Purchasing: includes procurement of raw materials and
others, to ensure the realization of primary activities
Slide 47
VALUE CHAIN Cont.
Below is a pictorial representation of the value chain process

AIS AND CORPORATE STRATEGY
» Organizations have IT
Developments
limited resources,
thus investments to
AIS should have
greatest impact on
Return on investment.
» Organizations need to AIS
understand: Organizational Business
✓ IT developments
Culture Strategy
✓ Business strategy, and

✓ Organizational culture
Understand the contextual dimensions of AIS
CONTEXTUAL ISSUES
Accounting information systems possess four key
contexts:
o procedural/processing context
o organisational and relational context
o functional context
o social and political context
PROCEDURAL/PROCESSING
CONTEXT
Under the procedural context, AIS are regarded as a set of
procedures involving:
o Data collection: This is the first operational stage of an AIS.

The objective is to ensure that event data entering the
system are valid, complete, and free from material error
o Data maintenance: an ongoing process of continual
improvement and regular checks on accounting data to
keep it reliable and valid.
o Data management: "Data Management is the development
and execution of architectures, policies, practices and
procedures that properly manage the full data life-cycle
needs of an enterprise” (DAMA international)
PROCEDURAL/PROCESSING
CONTEXT
o Data control: it might be part of an internal control
system. It is involves the governing and managing
of data. e.g. audit trail, information security etc.
o Information generation: it is the process of
compiling, arranging, formatting, and presenting
information to users. information can be an
operational document such as sales order, a
structured report, or a message on a computer
screen
Organisational and relational
context
From an organizational context, accounting information
systems are essentially hierarchical information systems
– that is, they are designed to assist in:
o defining business strategies/policies
o embedding information into tactical decision-making
processes
o providing useful information for operational control
purposes
FUNCTIONAL CONTEXT
The functional context is of the view is that Accounting information
systems provide a transaction processing facility for the :
» revenue cycle: generally consisting of a marketing system, a

transportation system, and a sales and debtor system
» expenditure cycle: generally consisting of an acquisition control
system, a receiving and inspection system, and a purchasing and
creditor system
» conversion cycle: generally consisting of a stock control system, a
production control system and a payroll system.
» management cycle: generally consisting of a cash receipts and
payments system, a fixed assets and property system, and a general
ledger system.
These are discussed in subsequent chapters
SOCIAL AND POLITICAL CONTEXT
o Accounting information systems have many users
and involve many different groups of stakeholders.
o More importantly, such systems are subject to a
range of social, political and economic influences and
controls – both internal and external to the company.
o AIS is created by the combined pressures of these
internal and external influences, and conditioned by
the requirements of internal, and external users.
Internal and External Influences on
AIS
Internal influences on accounting information systems relates
to
– the size of the company,

– the knowledge base and intellectual capacity of the
company (and its employees),
– the structure/organisation of the company
– the complexity of information demands and requirements,
– internal management factors/features and of course,
– the availability of company resources.
AIS
External influences on accounting information systems include
issues related to:
o Relates to political influences such as company law
requirements,
o other legal/political requirements imposed by quasi-
governmental organizations,
o social influences such as professional reporting standards
requirements such as GAAP, IFRS and other professional
pronouncements, economic influences such as market
regulatory requirements (GSE, and International stock
Exchange requirements),
AIS
o Industry standards/regulations and of course,

o technological influences such as of hardware/software
technologies constraints.
End of Lesson
ACCT 406
Complied By
Shadrack Asare (KDK)
&
Micheal Nudekor (T.A MICKY)
DISCLAIMER: Presentations merged for convenience. Original content belongs to respective

owners. We do not guarantee accuracy of content.
ACCT 406
Dr Francis Aboagye Otchere & Dr Edward Nartey

Accounting Databases
At the end of this lecture you should be able to:

o Know the role of databases in accounting systems
o Identify database types and database structures
o Know database essentials
Slide 64
Importance of Good Data
o Incorrect data can lead to:

- Bad decisions
- Embarrassment
- Angry users
o The Data Warehousing Institute (DWI) estimates that bad data
cost businesses over USD 600 billion a year in:
- Unnecessary postage
- Marketing costs
- Lost customer credibility
o It is estimated that over 25% of business data is inaccurate or
incomplete
Slide 65
Three Functions of AIS
o Data storage
o Provide information for decision making
o Safeguarding information assets
Slide 66
Know the role of databases in accounting system
Slide 67
Purpose of Database in Accounting
o A database is a collection of related tables.

o Accounting systems use database to collect and store data
o The accounting software appears on the accountant’s
computer screen.
o The accounting database that stores the accounting data runs
behind the screen of the accounting software.
Slide 68
Advantages of Databases Over
Traditional File Systems
o Data sharing
o Centralized control
o Redundancy control
o Improved data integrity
o Improved data security
o Reduced data maintenance cost
Accounting Software
o Accounting software is often classified into three categories

- Small businesses
- Medium scale (or midsize) enterprises
- Large scale
o Databases are behind the screen.
o Integrated database – associated with small business
accounting software i.e. database is automatically installed
once the software is installed.
o Front-end software application (user interface) is associated
with large scale enterprises using enterprise software such as
SAP.
Slide 70
Accounting Software
o A database software application such as an Oracle database is

installed as a separate component.
o Large scale enterprise software with a front-end software
application on screen and a behind-the –screen database can
be compared to a high-end Bang.
Slide 71
Accounting Software
Slide 72
QuickBooks Home Page
Three Tiers in the Accounting Systems
Architecture
o Database tier
o Application tier
o User tier
Slide 74
Accounting Database Behind the Screen
Slide 75
Slide 76
Application Tier
o Consists of software applications such as accounting

software
o The accounting software interacts with a DBMS to:
- Add
- Update
- Delete
accounting data in the database
Slide 77
Database Management System (DBMS)
o Is a software used to:

- Create database tables
- Transfer data from the accounting software to the database
- Update data in the database
- Delete data from the database
- Sort database tables
- Run queries
o Databases provide enterprises with the capability to collect
and use data which originally was not possible or cost
effective
Database Administrator
o The DBA is responsible for managing the enterprise’s

databases
o The DBA together with internal auditors establish
policies and procedures for database security,
including backups and disaster recovery
User Tier
o Consists of the user interface that appears on the

accountant’s computer screen
Slide 80
Identify database types and database structures
Slide 81
Database Types
Internal Databases
o The data belongs to the organization
o Consists of two varieties:
- Operational databases
- Data warehouses
o Used to store data related to operating the business
o Includes data collected from accounting transactions
such as
- Vendor transactions
- Customer transactions
- Employee payroll
Slide 82
Data Warehouse
o Used for business intelligence purposes to improve

management decision making
o Store data from a variety of sources
o Data stored in the data warehouse may be current
data, historical data, or future estimates
Slide 83
External Databases
o Databases containing data collected by other

organizations
- Government agencies
- Securities and exchange commission
- Research organizations
- Marketing Research Associations
- Financial organizations
- National and international trade organizations
Slide 84
Database Structures
o Relational database
o Hierarchical database
o Network database
Slide 85
Relational Databases
o Three dimensional with many interrelated tables

o In a relational database the tables are related or
connected through fields that are common to two or
more tables.
Slide 86
o Represents conceptual and external level schemas as

if data are stored in two-dimensional tables.
o The data are actually stored not in tables, but in the
manner described in the internal-level schema.
o Each row in a table, called a tuple contains data
about a specific item in a database table.
o Each column contains data about an attribute of that
entity.
Slide 87
o Stores data in database tables

o The tables are related to each other using common
fields in two different tables
o Data is retrieved by using the relationship between
tables, thus, it is called a relational database
o The common fields are referred to as the primary key
and the foreign key.
Slide 88
Hierarchical and Network Database
o Store data in records that are not grouped into

database tables
o Records are categorized as parent and child records.
o When data needs to be retrieved, instead of using
the relationship between tables to retrieve data,
hierarchical and network databases use record
addresses to search for data.
Slide 89
Hierarchical and Network Databases
o A parent record can have many child records, and

each record can have only one parent record
resulting in a hierarchical structure
o A parent record can have many child records, and a
child record can have many parent records in a
network database resulting in network of records
Slide 90
Know database essentials
Database Essentials
o Fields
o Record
o Tables
o Database
Slide 92
Basic Elements of Data Hierarchy
Slide 93
Fields and Records
Two-Dimensional Database
Three-Dimensional Database
Build a Database (Fields)
Enter the following in an Excel spreadsheet
- Customer No.
- Company Name
- Last Name
- First Name
- Street Address
- City
- State
- ZIP
- Country
- Account Balance
Slide 97
Produce a Record of 10 Customers
o Database records are a collection of related fields, populated

with data
o Each record is populated with data about properties of the specific
customer.
o In order to retrieve data stored in the database, each record must
have one or more fields that are unique identifiers for each record
in the database.
Slide 98
Produce a Record of 10 Customers
o The unique identifier is called a primary key. For example, in

the CUSTOMER table, the unique identifier is the customer
number field (Customer No.) because each customer should
have a different customer number.
Slide 99
Produce a Database Table
o A database table is a collection of related records

with a unique table name. A table stores records of
the same type, such as customer records.
Slide 100
Produce a Database
o In a relational database, the database tables are related or

connected through fields common to two or more tables.
o For example, the Customer No. field appears in the
CUSTOMER table, and the Customer No. field would also
appear in the SALES ORDER table. Thus, the Customer No.
field connects or relates the CUSTOMER table to the SALES
ORDER table.
Slide 101
End of Lesson
ACCT 406
Complied By
&


ACCT 406
Lesson 3
Dr. Francis Aboagye Otchere & Dr. Edward Nartey
Database Forms, Queries and Reports
At the end of this lecture you should be able to:

o Describe the role of database Forms, database Queries, and
database Reports in accounting systems
o Discuss the steps for designing and implementing a database
system
l
Slide 106
Describe the role of database Forms, database Queries

and database Reports in accounting systems

3 Database Essential Terms
The front-end user interface is served by three database

essentials:
o Database forms
- Database screen to input data
o Database queries
- Database searches and retrieves accounting data
o Database reports
- Database screen for output data

User Interface Components
The accounting interface consists of four main interface

components
oNavigation
oDatabase forms
oDatabase queries
oDatabase reports

Accounting Interface
Slide 110
User Interface Tools
o Icons
o Command buttons
o Check boxes
o Text boxes
o List boxes
o Tab control

User-Friendly Interface
Characteristics considered to make software more user friendly

o Streamlined uncluttered design
o Effortless navigation and guidance
o Customizable preferences
o Enhanced productivity

Database Forms
Well-designed database forms are designed to save

time and minimize data entry errors.
o Enter data once
o Use data validation
o Enable auto entry
o Mirror paper forms
o Design user-friendly forms
o Implement appropriate security

Baseline Accounting System
Slide 115
Customer Module
o Some of the typical database forms used in a baseline

customer module of an integrated accounting system include
- An order form
- Invoice
- Credit memo
- Customer payment receipt
- Accompanying deposit ticket

Vendor Module
o Database forms used for a baseline vendor module

include
- Purchase order
- Receiving form
- Bill entry form
- Check form

Employee Module
o The baseline employee module include

- Database forms for adding employees
- Time tracking
- Calculating payroll

Banking and Financial Module
o Banking module include

- Database forms for writing cheques
- Making deposits
- Reconciling bank statements
o Financial module include an onscreen journal database form
used to
- Enter adjusting entries to bring accounts up to date at year
end
- Make correcting entries
- Closing the accounts at year end.

DBMS Languages
DBMS has several languages:

o Data definition language (DDL):
- Builds the data dictionary
- Creates the database
- Describes logical views for each user
- Specifies record or field security constraints
o The data query language (DQL):
- A high-level English like language
- Contains powerful, easy-to-use commands
- Enable users to retrieve, order, sort, and display data.
Slide 120
Data Dictionary
o Contains information about the structure of the database

o For each data element stored in the database there is a
record in the dictionary describing it.
o The DBMS maintains the data dictionary, whose inputs
include new or deleted data elements and changes in
data element names, descriptions, or uses.
o The outputs include reports for programmers, designers
and users.
- Programs or reports using a data item,
- synonyms for the data items in a file, and
- data elements used by a user.
Slide 121
Schema
o A description of the data elements in a database, the

relationships among them, and the logical model used to
organize and describe the data.
o Three levels of schema:
- Conceptual – the organization wide view of the entire
database, list all data elements and the relationships among
them.
- Internal - a low-level view of the database describes how
the data are stored and accessed , including record layouts,
definitions, addresses, and indexes.
- External- an individual user’s view of portions of database
each of which is referred to as subschema
o
Slide 122
Logical and Physical Views of Data
o The database approach provides two separate views of the data:

- Physical view – the way data are physically arranged and
stored in a computer system
- Logical view – how people conceptually organize and
understand the relationships among data items.
o DBMS software links the way data are physically stored with each
user’s logical view of the data.
o DBMS allows users to access, query, or update the database
without reference to how or where data are physically stored.
o Separating the logical and physical views suggests that users can
change their logical view of data without changing the way data
are physically stored.
Slide 123
Discuss the steps for designing and implementing a

database system

Database Design
Four steps:
o Identify and build database tables
o Identify and enter fields for each database table
o Select primary keys
o Identify and build relationships among database
tables
o Using and maintaining the new system
Slide 125
Relationship Types
o One-to-one relationship
o One – to – many relationship
o Many – to – many relationship

One-to-One Relationship
o For each one record in one database table there is

one record in the related table.
Slide 127
One – to – Many Relationship
For each one record in one database table there may

be many records in the related table.

One –to - Many Relationship

Many – to – Many Relationship
There may be many records in one table that relate to

many records in the related table.

Database Anomalies
o Are problems in the design of a database

o They can result in inaccurate, incomplete, or
unreliable data
o Poorly designed database may contain problems with
- Inserting
- Updating
- Deleting data
Slide 131
Deletion Problem
Deleting for example, Vincent as a customer will cause

the deletion of four other records. These four records
hold vital information about four orders and four items
that will also be deleted.
Slide 132
Update Problem
To update Angela's customer address, three records

would need to be updated. In addition, there are no
fields for recording the city, state, and ZIP code.
Insertion Problem
To identify a unique record, we have to use the

customer number, order number, and item number. That
means these three fields together form the primary key.
If we want to insert a customer who hasn't placed an
order yet, then the order number and item number are
empty (null), and we do not have a primary key for
retrieving the record.

Designing Relational Databases
o Step 1: Identify and build database tables

o Step 2:Identify and enter fields for each database
table
o Step 3: Select primary keys
o Step 4: Identify and build relationships among tables
o Step 5: Identify the type of relationships between
tables

End of Lesson
ACCT 406
Complied By
&


ACCT 406
Systems Development Process

Lecture 4
UNIVERSITY OF GHANA BUSINESS SCHOOL

2019/2020
After engaging in this lecture, you should be able to:

o Understand the keys to a successful system
development
o Summarize the stages of the systems development life
cycle (SDLC)
o Briefly explore the common systems development tools
that can be utilised.
Understand the keys to a successful system

development
140
Three Main Functions of the Accounting
System
o Store data – this is usually accomplished relational database

o Analyze and use data – this may be accomplished using
shadow data in spreadsheets or business intelligence
techniques
o Safeguard the accounting data – internal control and
cybersecurity are used to safeguard the data stored and used
by the accounting system
141
3 Keys to a Successful Accounting Systems
142
IT Professionals Involved in Designing an
Accounting System
o System analysts – design the system, specifying the
components needed by the accounting systems
o Database designers – create the design for the
accounting database
o Database developers – build the database using the
database design and RDBMS software
o Application developers or programmers – design and
write the software for applications such as accounting
software
o Network specialists – design the network for a new
system
143
The Processes Involved
o Two tools are used by IT professionals to define and

structure the process for developing accounting
systems
- System developing life cycle (SDLC) – a series of
phases used to create a system: plan, analyze,
design, build/buy, install, and deploy
- System development methodology (SDM) – the
order and timing of when SDLC phases are
completed
144
Accounting System Technology
o Accounting software
o Database and DBMS
o Network and protocols
o Desktop and laptop computers
o Cybersecurity and technology to safeguard
information system
145
Summarize the stages of the systems development life

cycle (SDLC)
146
Systems Development in Context
» Systems development is important ...

– The outcome is to create a system that
allows the organisation to function more
effectively.
» Reasons for change can include:
– An outdated system that needs to be
replaced.
– To improve strategic position (e.g.
strengthen customer or supplier
relationships).
– A new business has no systems in place.
» Systems development activity
requires an effective approach.
– The focus in this lecture
Business size and complexity
» But ‘one size does not fit all’

» Classifications on size are or can be too general.
» For example:
– A firm with $10 million turnover and 50 employees may
only need a simple package.
– But another organisation of a similar size may need a more
complex ERP system.
» System selection can be a complex or simple process.
» Which leads us to the Systems Development Life Cycle
What is SDLC?
o The system development life cycle (SDLC) is a process for

analyzing, designing, organizing, and integrating the three
keys (people, process, technology) to a successful accounting
systems.
o The SDLC provides a common language for communicating
with programmers, system analyst, database administrators
and other IT professionals engaged in accounting system
development
o The SDLC is a series of phases to create a system
149
Systems development life cycle [SDLC]
» The systems development

lifecycle represents a very
structured and
methodical way of doing
development projects.
» Each of these stages has a
predefined input and
output.
» Outputs of one stage
provide input for next
stage.
SDLC: investigation stage
» The investigation stage is

concerned with identifying any
problems or opportunities
with the current systems and
identifying the feasibility of
responding to these problems
and opportunities.
» Triggered by a problem or an
opportunity.
SDLC: investigation
» Need to assess » Technology should be

organisational fit: investigated to ensure it is
– ‘how well the technology a good organisational fit
is aligned with the for the problem or
overall organisational opportunity.
strategy and strategic
priorities’. » Three main phases of
the investigation stage …
SDLC: INVESTIGATION PHASES – problem
identification
» Involves those working on the

system development and a
user representative group.
» Factors to consider:
– System speed
– System adequacy
– Required information
– Predicted changes
– General triggers
SDLC: INVESTIGATION PHASES – problem
scope
» Problems or opportunities in
the existing system identified.
» Define the systems
development scope:
– project aims and coverage
– development and priority levels
– project outcomes
– no variance once a project has
begun.
SDLC: INVESTIGATION PHASES - feasibility
» Evaluation of the alternatives

– Financial: economic costs and benefits.
▪ Total cost of ownership
– Legal: legal environment.
– Schedule: time period, PERT and Gantt
charts.
– Technical: evaluate existing
infrastructure.
– Strategic: goodness of fit.
» Leads to a systems development
steering committee
SDLC: INVESTIGATION PHASES - feasibility
» The systems development steering committee

selects the most feasible alternative.
– Members occupy power positions.
– Determine project approval.
– Allocate resources.
– Perform critical role throughout the life cycle.
SDLC: Analysis stage
» This stage has two parts:

1. Systems analysis:
understanding what the
current system does and
how it operates.
2. Requirement analysis:
specifying what the new
system will need to do.
SDLC: Analysis – systems analysis
» Requires a thorough understanding

of the current system, its
operations and design.
» Method:
– Analyse systems
documentation:
▪ logical and physical dataflow
diagram
▪ systems flowchart.
▪ Business process diagrams
SDLC: Analysis – systems analysis
» Understanding what the current system does and what the

new system needs to do
– Requirement analysis
» Techniques for acquiring information:
– questionnaire
– observation
– interviews
– prototyping.
SDLC: Analysis – OUTCOMES
» A list of system development

requirements is developed.
» Evaluate whether project scope is
realistic.
» Provides some initial structure to the
proposed design.
» Steering committee to ensure the
analysis and project scope are a
goodness of fit.
SDLC: DESIGN STAGE – overview
» Systems design takes two

perspectives:
» Logical:
– concerned with a design that
is independent of the actual
technology required for its
implementation.
» Physical:
– requires the specification of
the technical aspects.
SDLC: DESIGN STAGE – OUTPUTS AND INPUTS
• Determine outputs:
– be familiar with the outputs different users
require to complete daily tasks.
• Determine inputs:
– work backwards from outputs to decide what
inputs will be required to produce specified
outputs:
• e.g. deconstructing reports.
SDLC: DESIGN STAGE – STORAGE
MECHANISM
• Database design:
– Logical design: describes how the new system will operate.
• Business process map.
• Data flow diagrams.
• Conceptual design.
– Technical design: find the technology to allow
implementation of logical design.
• Hardware and technical resources.
• User interface.
SDLC: DESIGN STAGE – APPROVAL
» Approval required before

proceeding.
» Prototype could be developed.
» Imperative that designers and
users concur on the design.
» Once design is signed off no
further design changes should be
permitted.
» Go to vendor selection ….
SDLC: DESIGN STAGE – APPROVAL
» After approval the organisation must determine where it will

source the required hardware and software.
» One alternative is to select a vendor:
– Request for proposal (RFP) sent to vendors:
▪ Outlines system specifications, company details, and
the problems to be solved.
» Steering committee gives final approval on design and vendor
» Leads to the implementation stage …
SDLC: IMPLEMENTATION - OVERVIEW
» This stage involves getting the

system up and running within
the organisation.
» Activities:
– build physical environment
required for new system
– data storage facilities
– any required programming must
be completed
– system may need to be installed
– thorough testing of system.
SDLC: IMPLEMENTATION – TECHNICAL
ASPECTS
» Network and database:
– Starting point for implementation.
– Technical specifics for the network come from
specifications.
» Programs:
– Two forms:
▪ modified existing programs
▪ in-house-developed programs.
SDLC: IMPLEMENTATION – alternative
approaches
1. Direct conversion: switching off the old system
today and switching on the new system tomorrow.
2. Parallel conversion: running the new and system
together for a period of time.
3. Phased-in conversion: gradual implementation.
Irrespective of the approach … need to take the staff

with you.
SDLC: IMPLEMENTATION – key aspects
» Preparation for conversion:

– Users: adopting the new system are critical to achieving
intended objectives.
» Documentation:
• represents invaluable planning and design tools at the
various stages of the systems development life cycle.
SDLC: IMPLEMENTATION –
maintenance
» General aim of keeping the
new system running and
supporting users in their
interactions with the
system.
» Three stages of
maintenance:
– System improvement: adding
new features or functions.
– System modification:
changing an existing feature.
– Bug correction: fixing any
errors.
SDLC: IMPLEMENTATION - REVIEW
» Completes the systems

development lifecycle
» Ex-post analysis on the systems
development project.
» Conducted after a settling down
period.
» Evaluates performance of the
new system.
» Considerations:
– Project team’s performance.
– New system’s performance.
Briefly explore the common systems development tools

that can be utilised.
172
Systems Development Management
Tools
» Many tools can be used
in managing the
systems development
project.
– Gantt charts
– Critical path
analysis/PERT charts.
– Computer-aided
software engineering
(CASE) systems.
SYSTEM DEVELOPMENT MANAGEMENT
TOOLS – GANTT CHARTS
Gantt Chart
A Gantt chart is a graphical way of planning and

controlling the progress of a systems development
project.
175
CRITICAL PATH ANALYSIS/PERT CHARTS
CPM/PERT
o Mathematical based means of project management

o Works for projects with independent activities
o Developed in the 50s at DuPont
177
Case Systems
Case Systems
o Computer-aided software engineering (CASE)

systems:
o CASE systems are software packages that can help in
the various stages of systems development
particularly in the design of source code and user
documentation.
179
Key Points in Summary
» We have …
» Considered factors that may
impact on systems development
strategy.
» Summarised the five stages of the
systems development lifecycle.
» Considered the software
development options for SMEs.
» Briefly explored the common
systems development tools that
can be utilised.
End of Lesson
ACCT 406
Complied By
&


ACCT 406
Dr Aboagye Otchere & Dr. Edward Nartey

Entity Relationship Diagrams
o Understand database integrity as accurate and

complete database and the designer, builder, and user
realms
o Understand the features and uses of ERDs
o Describe the steps in drawing databases using ERDs
Slide 185
Understand database integrity as accurate and complete

database and the designer, builder and user realms

Database Integrity
Four rules to ensure database integrity
o Entity integrity
o Primary key integrity
o Domain integrity
o Referential integrity

Database Anomalies

Database Realms and terminologies

Understand the features and uses and of ERDs

ERD
o ERDs show the following:

- Entities: customer and sales order
- Relationship between entities: customer places an
order
- Relationship cardinality: one-to-many because
one customer can place many orders
o The entity relationship written on the relationship
line
Slide 191
ERD Relationships

Business Rules
o Business rules define attribute limitations, referential

integrity, and cardinalities of relationships among
entities.
o Describes how a business operates
o They define the following
- Attribute limitations
- Referential integrity
- Cardinality of relationships

Relationships Among Entities
o one-to-one relationships
o One-to many relationships
o Many-to-many relationships

One-to-Many (Maximum Orders)

One-to-Many (Minimum Orders)

Maximum Number of Customers Placing an Order

Minimum Number of Customers Placing an Order

Designing ERD Database
The ERD symbols used to represent entity relationships
for database modelling include the following
o Entity: a square or rectangular box
o Entity relationships: a diamond or connector line
between two entities
o Relationship cardinality: crow’s feet symbol
o Entity attributes: listed in the entity box
o Entity identifier or primary key: PK symbol listed by
attribute. Attribute is bolded

Entity Relationship Diagram Symbols

Entity Relationships Cardinality Symbols

One-to-Many Relationship Possibilities

Learning Objective3
Describe the steps in drawing databases using ERD

Database Modelling
o Step 1: determine the relevant business transactions that
the organization must support. Support
- Vendor transactions
- Customer transactions
- Employee transactions
o Step 2: determine the business rule for a specific
business transaction. Define
- Attribute limitations
- Referential integrity
- Cardinality of relationships among entities
-
Step 3
o Determine business entities and the relationships

among them. To identify the database entities
business transactions must be analyzed. To identify
relationships business rules are analyzed. Identify the
following
- Customers
- Sales order
- Item

Step 4
o Determine the entity identifier(s) for each entity.

- In database design entity properties are called
entity attributes
- Properties that identify specific entity occurrence
are called candidate keys
- The candidate key chosen to identify entity
occurrence in the database is called a primary key

Step 5
o Draw entity relationship diagram

- The three entities customer, sales order, and items
- The relationship between customer and sales order
is one-to-many
- The relationship between sales order and item is
many-to-many

Step 5

Step 6
o Optimize the ERD by removing many-to-many

relationships
- Convert any many-to-many relationships into one-to-
many relationships using intersection tables by
creating an intersecting entity e.g. between sales
order and item entities
- Create two new one-to-many relationships each of
which connects one of the entities involved in the
many-to-many relationship to the intersection entity.
-
Step 6
- The intersection entity will inherit the primary keys of

the two entities involved in the many-to-many
relationship as its own primary key
- The intersection entity’s primary key is a composite
primary key which means that more attribute is required
to uniquely identify a record (entity occurrence) in the
entity. For example, the primary key for the sales order
line entity is a combination of sales order no and item
No.
Slide 210
ERD Intersection Entity
Slide 211
ERD Intersection Entity Relationships
Slide 212
ERD Intersecting Entity Primary Keys
Slide 213
ERD with Intersection Table

ERD Using Intersection Table to Remove
Many-to-Many Relationships

Step 7
Add business-related attributes to the entity

relationship diagram

Entities and Attributes

ERD with Attributes

Step 8
o Implement relationships
- Implement the relationship lines into the database
tables to connect the tables
- This is done by copying the primary key of a parent
entity into a child entity
- For the child entity this field is called the foreign key
- Thus, the foreign key is a primary key of a parent
entity copied from a child entity in a one-to-one
relationship

ERD with Foreign Keys

Step 9
o Develop relational database tables

- Here each entity in the ERD is transformed into a
conceptual database table
- List the database programmer will need include
- Attributes
- Tables
- Primary keys (bold underline)
- Foreign keys (bold Italics)

Step 10
o Build relational database

- Select the database application software (eg
Oracle, SQL Server, MySQL, MS Access) to be
used to build the database

End of Lesson
ACCT 406
Complied By
&


ACCT 406: Accounting Information
Systems
Lesson 6
Accounting Systems and
Business Process
Learning Objectives
After this lecture students should be able to:

o Understand the role of business process in the
accounting system
o Identify the business processes in a baseline
accounting system
o Customize accounting systems using business
process mapping
227
Accounting Transaction Cycles
228
Role of Business Process in the accounting
System
o Business processes are related activities that create
value.
o The value chain is a related set of business processes
o Transaction cycles (e.g. expenditure, payroll,
conversion, revenue cycles) are associated with the
business process in the value chain
o The business process results in accounting
transactions.
o The accounting system must be able to capture and
store this transaction data
229
Business Process and the Transaction Cycles
230
Baseline Accounting System
o The baseline accounting system is a generic accounting

system that includes the workflow and business
processes frequently used by most enterprises.
o The dilemma facing enterprises has been:
- Do we change our business process to fit a generic
baseline accounting system or
- Do we custom-build an accounting system that fits
our unique business needs?
231
The ABCs of Accounting Systems
o The accounting system equals the baseline system plus

customization
o To create a customized accounting system, we
configure or customized the baseline accounting
system to accommodate the unique needs of the
specific enterprise
o In practice, several software vendors streamline the
system development process by using this ABC
approach (e.g. Accelerated SAP, ASAP from SAP) that
uses a baseline system that enterprises can configure
to meet their needs. 232
Advantages of the ABC Approach to
Accunting System
o Time savings – because the baseline is already
developed, the timeline for developing a system can be
accelerated, significantly reducing the time required
from start to finish.
o Best practices – often best practices for business
processes are incorporated into the baseline system
o Standardization – the baseline plus customization
approach offers advantages of standardization for the
system and customization for unique requirements.
233
Disadvantages of the ABC Approach to
Accounting System
o Not a good fit – the baseline system that is

commercially available may not be a good fit
o Costly customization – organizations may find
customization too costly and be forced to change
their business process to fit the commercial software
o Change management – adapting an organization’s
business process to meet the baseline system may
require extensive change. Change management may
be needed to reduce employee stress and turnover.
234
Business Process in a Baseline Accounting
System
o The baseline accounting system standardizes the
business processes that are common to almost all
organizations
o The baseline accounting system and its events can be
customized to fit enterprise specific needs.
o Six major modules common to most organizations
include:
- Customers - Banking
- Vendors - Financials
- Employees - Reports
235
Accounting Transaction Cycles
o Each modules contains business processes or related

activities that are basic elements for business
operations
o The vendors, customers and employee modules
correspond to the expenditure, revenue and human
resource transaction cycles
236
Buy or Build
o Organizations prefer to buy their accounting systems

instead of building them from scratch using custom
programming
o Enterprises can select commercially available
accounting systems such as:
- SAP
- Oracle
- Oracle’s JD Edwards
- Microsoft Dynamics
- QuickBooks
237
Benefits
Benefits offered by these off—the – self products

include the following:
o Best practices design
o Lower cost
o Tighter security
o More control
o Scalability
o Regular maintenance
o International compliance
238
Vendor Module
o The vendor model relates to the

expenditure/purchasing cycle for the organization and
the accompanying purchase transactions
o The vendor module consists of the following
transactions with vendors typically found in most
accounting systems.
- Create purchase orders
- Receive items (inventory)
- Enter bills
- Pay bills
239
Vendors Section of QuickBooks Homepage
240
QuickBooks Vendors Transactions
o The icons for the following:

- Purchase orders
- Receive inventory
- Enter bills against inventory
- Pay bills
241
Customer Module
o Customer module relates to the revenue cycle and

the accompanying transactions. It consists of typical
transactions with customers including the following
- Create invoices
- Receive customer payments
- Make deposits
o The customer section in the QuickBooks homepage
shows the following activities in the revenue cycle
- Create invoices
- Receive payments
- Record deposits
242
Customer Section of QuickBooks Homepage
243
Employee Module
o The employee module corresponds to the human

resource cycle and the corresponding payroll
transactions
o Typical events in the payroll cycle include the
following:
- Enter time
- Calculate payroll
- Pay employees
- Pay payroll liabilities
244
Employees Section of the QuickBooks
Homepage
245
Banking Module
o The banking module consists of transactions involving

cash received and cash paid
o The typical banking transactions covered consists of the
following:
- Cash paid to vendors
- Cash received from customers
- Cash paid to employees
- Cash paid for payroll transactions
246
The Banking Module
The banking module is typically a continuation of other

modules:
o Pay Bills is a continuation of the purchasing cycle
transactions (vendors module).
o Make Deposits is a continuation of the sales cycle
transactions ( customers module).
o Pay Employees and Pay Payroll Liabilities are
continuations of the payroll cycle transactions
(employees module).
247
The Banking Section of the QuickBooks
Homepage
o Record deposits
o Write cheques
248
Financial Module
o The financial module consists of other activities and

transactions that do not fall into the prior modules.
Such items would include:
- Adjusting entries: Entries to bring accounts up to
date, such as recording depreciation for the period
- Correcting entries: Entries necessary to correct
errors
- Closing entries: All entries needed to close
temporary Income and Expense accounts at year
end
249
Financial Module
- Other: All other transactions and entries needed to

properly maintain and operate the accounting System
o The financial module includes all tasks necessary to
maintain the enterprise's General Ledger.
o The General Ledger is the listing of accounts and
their balances, including the transactions affecting
each account.
o The accounts in the enterprise's General Ledger are
the building blocks of the entire accounting system.
250
Financial Module
o Accounts are used to sort accounting data into similar

categories.
o For example, a company's Checking account is
affected by the following banking transactions:
- Pay bills for vendor transactions to purchase goods
and services.
- Deposit payments from customers for goods and
services.
- Make payments to employees for payroll.
- Pay payroll liabilities.
251
Reports Module
o The reports module relates to output from the

accounting system.
o Reports can be onscreen, in electronic files, or on
hardcopy printouts.
o In general, we can classify reports into the following
four basic types.
- Financial accounting and regulatory reports
- Tax reports
- Management reports provided to internal users of
accounting information
252
Reports Module
- Sustainability reports provided to current and

potential investors, consumers and humanitarian and
environmental organizations
o Sustainability reports provide information about the
sustainability of an organization's economic, social, and
environmental performance and impact.
o The format of sustainability reports can vary widely
because at this time there is no required framework or
regulation of sustainability reporting.
253
Business Process Mapping
o Business process mapping graphically describes the

processes of the accounting system
o It diagrams step-by-step the activities performed in a
process
o A streamlined, effective approach to business process
mapping is to start with the baseline accounting
system.
o Each module in the baseline system is mapped for
business processes and activities performed within that
module
254
Business Process Mapping
o The baseline modules for vendors, customers,

employees, banking, financial, and reports are
expanded and customized to show the detail of the
business processes for the specific enterprise.
o The employees module, for example, might be
customized by adding payroll features to meet
enterprise requirements for payroll with holdings,
such as health insurance, SSNIT contributions, and
charitable donations.
255
Why Use Business Process Mapping
o With the business process map, you can plan in

advance and think through contingencies when
needed. You can plan for each step of the process and
the most effective path to accomplish required
activities
o In general, reasons to use business process maps for
accounting systems include:
256
Reasons for Using Business Process Mapping
for Accounting Systems
- Accounting and IT professionals need a communication
tool so together they can design together an effective,
reliable accounting system.
- Communication tool. The business process map is a
communication tool between the accounting
professionals who use the system and the IT
professionals who develop the accounting system.
- The business process map facilitates communication
between the accounting and IT professionals so each can
see and reach a common understanding of the overall
design requirements and activities.
257
- Documentation tool. The business process map
documents the various activities to be performed and
the order in which the activities must occur. A business
process map can be a valuable tool for a new employee
trying to learn a new accounting system fast.
- When you start a new job, consider asking if there is a
business process map for the activities you are
assigned. If not, consider drawing your own business
process map to learn the job faster.
258
- Streamlining tool. Sometimes tasks are performed a
certain way because they have always been done that
way-instead of because it is the most effective way to
perform the task.
- By streamlining operations, companies can cut costs.
Business process mapping is a valuable tool to
envision how an accounting system can be improved
and streamlined, while at the same time maintaining
security and control over confidential information.
259
Business Process Management
o When a new accounting system is developed,

organizations often streamline business
processes to improve effectiveness. This is
sometimes referred to as business process
management or 8PM. How can the enterprise's
business processes be improved? Can any
steps be eliminated?
260
Notations Used in Business Process Mapping
o Just as different roadmaps have different symbols and

notations for identifying different elements on the
map (interstates, highways, cities, towns, and so on),
a business process map can be drawn using different
types of symbols and notations.
o Some of the standard notations that you may see used
for business process maps include:
261
Notations Used in Business Process Mapping
o Flowcharts
o Data flow diagrams (DFD)
o Unified modeling language (UML)
o Business Process Model and Notation (BPMN
262
Flowcharts
o First used in the 1920s, flowcharts are still used today

to graphically describe a series of activities and
decisions.
o Accounting professionals may prefer flowcharts for
business process maps because of simplicity.
o Flowcharts are an easy option for accounting
professionals to learn quickly.
o The advantage of simplicity for flowcharts is also a
disadvantage.
263
Flowcharts
o Flowcharts do not always provide the level of detail

that IT professionals need to develop accounting
systems and applications.
o This can lead to miscommunication and flawed
systems.
264
Flowchart for Sales Cycle
265
Data Flow Diagrams
o DATA FLOW DIAGRAMS (DFD) First used in the

1970s, data flow diagrams use only four symbols to
graphically describe processes and data flow: agent
(square), process (rounded rectangle), data store (three-
sided rectangle), and data flow (line and arrow).
o The advantage of a DFD over a flowchart is that DFDs
specify agents (individuals performing the processes).
266
DFD
o One disadvantage of DFDs is that there is no symbol

for decisions.
o Another disadvantage of DFDs is that there are more
modem methods of business process mapping that
have become more widely used.
267
DFD for Sales Cycle
268
Unified Modelling Language
o UML has gained widespread use among IT

professionals, but it is an extremely complex business
processing mapping tool that has hundreds of
different symbols.
o The level of complexity possible with UML has made
it popular with IT professionals and at the same time
makes it challenging and time consuming for
accounting professionals to learn and use as a
communication tool.
269
Business Process Modelling & Notation
o Introduced in 2011, BPMN 2.0 provides a business

process mapping standard for bridging the gap between
IT professionals and business users, such as accountants.
o BPMN 2.0 doesn't require extensive training to use,
making it a better choice for accounting professionals to
understand and use to communicate with IT
professionals.
o On the other hand, BPMN 2.0 provides greater detail
than flowcharting to meet the needs of IT professionals
for successful system implementation.
270
o So BPMN provides a balance between simplicity and

complexity to facilitate communication between the
accounting and IT professionals
o Since BPMN 2.0 was developed to bridge the
communication gap between IT and business users
who must work together as a team to design, develop,
and implement systems, knowledge of BPMN 2.0
diagrams could make you a valued team member to
bridge the communication gap.
271
o Knowledge of both flowcharts and BPMN 2.0 can

satisfy the demands placed on you by both
accountants and IT professionals. A fundamental
knowledge of flowcharts and BPMN 2.0 could give
you a competitive advantage, so we will use both to
illustrate business process maps for an accounting
272
Sales Cycle BPMN Diagram
273
End of Lesson
ACCT 406
Complied By
&


ACCT 406: Accounting Information
Systems

Lesson 7
ACCOUNTING SYSTEM & BUSINESS PROCESSES II
Learning Objectives

o Describe the steps involved when building business
process map
o Build a business process map for an organization
o Customize a baseline accounting system
278
Sales Cycle and Create Invoices BPMN Diagrams
279
Steps in Building a Business Process Map
This involves 5 steps as follows:

o Step 1: Write narrative for a business activity.
o Step 2: Annotate the narrative.
o Step 3: Create a business process map to organize
activities.
o Step 4: Develop a business process map using the
information from the business process map organizer.
o Step 5: Repeat steps 1 through 4 for each subprocess as
needed.
280
Step 1: Write a Narrative for the Business
Process
o It describes how the business activity of a company is

conducted
o This narrative should be a general description of the
business process and only include major activities. .
281
Step 2: Annotate the Narrative
o After a narrative is prepared, annotate the narrative by

underlining the activities in the narrative.
o Typically, the narrative is told in chronological order, so
if you prefer, you can identify the activities as Activity
1, 2, and so on.
o Notice that the activities typically describe an action,
such as process
282
Step 3: Create a Business Process Organizar to
Organize the Activities
o After annotating the narrative, create a table to organize

activities.
o The number of columns in the business process map
organizer will vary based upon whether you are using a
flowchart or a BPMN to diagram the business process.
o If used for a BPMN diagram, the organizer might have
four columns: activity, gateway, swimlane, and data
store.
o The organizer contains as many rows as the number of
activities plus gateways for the business process.
283
Preparing the Organizer
o To prepare the organizer complete the following steps

- Place the first activity (or gateway) in the first row.
- Place the second activity (or gateway) in the second
row.
- Continue until all annotated activities (and
gateways) are placed in the organizer.
- Make sure that these activities (and gateways) are
placed in the organizer in the order performed.
284
Preparing the Organizer
o For each activity or gateway, identify the swimlane in

which the activity or gateway should appear. Insert
the name of the swimlane in the swirnlane column for
the activity or gateway.
o For each activity or gateway listed in the organizer,
identify database tables used. Insert database tables in
the data store column for the activity or gateway.
285
286
Step 4: Develop a Business Process Map Using
Information in the Business Process Map
Organizer
o Using the notation for flowcharting or BPMN 2.0,

create a business process map.
o Build the business process map so that you have one
activity or gateway to correspond to each row in the
organizer
287
Step 5: Repeat step 1 through 4 for
subprocesses as Needed
o If additional detail is needed for a process, add a ( +)

sign to the process symbol.
o To map the additional detail, repeat steps 1 through 4
to develop a BPMN diagram for the subprocesses
288
Build a business process map for an organization
289
Collecting Information to Build a Business
Process Map
o When creating a business process map, information
about the tasks and activities involved in an
enterprise's business processes can be collected using
various techniques, including the following:
- Review current accounting system documentation.
- Observe business processes.
- Interview employees.
- Conduct surveys
- Prepare narrative
290
Review Current Accounting System
Documentation
o One of your first tasks when preparing a business
process map is to collect, review, and organize all the
documentation you can find.
o This includes any business process maps that
document the current system.
o Typically, the first step in collecting information for
business processes documentation is to review the
documentation for the current system. Some
organizations may have little, if any, formal
documentation for their accounting system.
291
Review Accounting System Documentation
o Many times the accounting system evolves as the need

arises, so there may not be any current system
documentation to review. If well documented, each step
of the design of the accounting system including
business process mapping should have been documented
and saved.
292
Observe Business Process
o After collecting and reviewing the documentation

available for the current system, you need to observe
operations to verify that the business operates the same
as the documentation shows.
o There are a couple of reasons why this may not be the
case
- First, the documentation may be outdated. The system
may have been updated, but the documentation was
not.
- Secondly, the system may be outdated. Business
processes may have changed, but the system did not.
293
Observe Business Process
- So the system and the documentation may agree,

but the actual processes used by employees are
different.
- The business processes may have changed due to
technological advances, streamlined operations, and
cutting "red tape" by bypassing control procedures
to name a few reasons.
o It is often wise to observe business operations and
accounting procedures in action without anyone
realizing that you are observing them.
294
Interview Employees
o Typically, you will want to interview employees who work

in the various areas for which you are creating business
process maps.
- First, prepare a list of employees that you want to
interview.
- Second, prepare a list of questions that you will be
asking each employee.
- Third, be organized and have a system for recording the
employee responses. You may want to use a laptop to
enter responses as you conduct the interview.
295
Interview Employees
- Fourth, schedule interviews. Specify the amount of

time you will require from the employee, and plan
accordingly so you can stay within the time limit. To
obtain maximum cooperation from employees, you
will want to be considerate of the effect on the
employees' work schedules.
- Fifth, conduct the interviews. At the beginning of the
interview, state the reason for the interview.
o Keep in mind that employees may be concerned about
performance evaluations or job elimination as they are
speaking with you, and this could influence their
296
responses.
Interview Employees
o Interviewing employees on-site at their work area

instead of conducting the interviews in a conference
room might be less convenient for you.
o However, on-site interviews provide the greatest
opportunity for you to observe further how the
procedures and processes are carried out by each
employee.
- Sixth, compile your documentation from the
interviews. Index and/or code the results of your
interview for easier retrieval later.
297
Conduct Surveys
o Information can also be collected from employees using
surveys. These instruments ask questions to collect
information about how employees perform their
responsibilities.
o The questions can be either open-ended or close-ended.
Close-ended questions have defined answers from
which the employee chooses.
o On the other hand, an open-ended question would ask
the employee to list the steps he or she performs when
there is a shift change. Open-ended questions are
preferred to elicit the most useful information.
298
Prepare Narratives
o After you collect the documentation from the current

system as well as documentation you prepare from
observations, interviews, and surveys, you will need to
organize all the documentation into a workable form.
o Sometimes a narrative is prepared that tells the story of
the processes and procedures used to conduct business.
o Occasionally, it works out well to ask the employees to
tell the story, or narrative, of what they do each day,
preferably in an electronic form.
299
Avoid Black Holes, Miracles and Grey Holes
o To improve the design of your business process map,

verify that you do not have any of the three most
common errors of business process mapping.
- Blackhole
- Miracle
- Gray hole
300
Black Hole
o The black hole error occurs when the data is shown

going into an activity, but no data exits.
o A black hole in the universe has high gravity force,
which attracts and absorbs everything, including light.
o In a business process map, a black hole takes in data, but
there is no output data.
301
Black Hole
302
Miracle
o The miracle error occurs when miraculously

something comes out of a process, but there was no
input into the process.
o As illustrated in the diagram, there are four data flow
lines coming out of the process, but there is no data
flow line going into the process.
303
Miracle
304
Grey Hole
o The gray hole error occurs when the input data does
not generate the output information.
o For example, if you enter customer information into an
activity process customer order but the output data is
vendor information, there is an inconsistency between
the input data and the output data.
305
Grey Hole
306
Customize a baseline accounting system
307
Customization of an Accounting System
o When customizing a baseline accounting system,

perform a gap analysis:
- Determine the gap between the baseline system and
the customization desired.
- In a gap analysis, the gap between the baseline
modules and the customization required to meet
enterprise-specific needs is analyzed.
o Once the gap analysis is completed, there are two
general approaches to completing the customization:
big bang and stages.
308
Big Bang Completion
o The big bang approach to customization involves

customizing and installing customer, vendor, employee, and
remaining modules for the entire enterprise at the same
time.
o The advantage to this approach is that the new system goes
"live" all at once. This is also the biggest disadvantage.
o The enormity of installing an enterprise system for a huge
enterprise can be overwhelming in terms of resources and
logistics. If there are unresolved issues when the entire
system goes live, it can be crippling for the enterprise.
309
The Stages Approach
o The stages approach customizes one module or

geographic location at a time, stage by stage, until the
entire enterprise has been converted to the new
system.
o This approach permits developers to pilot the
modules, testing and resolving issues before moving
to the next stage.
310
The Stages Approach
o There are advantages and disadvantages to this

approach as well.
- One advantage is the ability to test and resolve
issues on a smaller scale, one stage at a time.
- The disadvantage is that the timeline for such a
project may seem prolonged
311
Customize Sales Cycle
o The four database tables used by the create invoice

BPMN diagram are:
- CUSTOMER
- SALES ORDER
- SALES ORDER LINE and
- ITEM tables.
o Each database table is shown with its related fields.:
312
Customer Module: Create Invoice Flowchart
313
314
Receive Customer Payments Business Process
Map
o The customer entered credit card information online when
placing the order.
o The company processes the credit card payment when
notified by the warehouse that the customer's order has
been shipped.
o The following database tables are used:
- CUSTOMER table
- SALES ORDER table
- SALES ORDER LINE table
315
Receive Customer Payment – Business
Process Map
o Data is retrieved from these database tables to process

the customer credit card payment with the credit card
company.
o Then a customer receipt is emailed to the customer.
The database tables are updated.
316
Customize Sales Cycle Transaction
317
Receive Customer BPMN
318
Make Deposits Business Process Map
o The following database tables are updated

accordingly:
- CUSTOMER table
- CASH RECEIPTS table
- CASH Account table
- GENERAL LEDGER table
o This completes the sales cycle for a company
319
Banking Module Flowchart
320
Banking Module Make Deposits BPMN2.0
321
Customization of Purchases Cycle
o To process a purchase order (PO), the following four

database tables are used:
- VENDOR table
- PURCHASE ORDER table
- PURCHASE ORDER LINE table
- ITEM table
o After reviewing the PO, an employee authorizes it by
entering his or her user ID.
o The database tables are updated.
322
Vendor Module: Create Purchase Order Flowchart
323
Vendor Module: Purchase Order BPMN 2.0
324
Receive Item Business Process Map
o The vendor delivers the items the company ordered.

o A packing slip that lists all the items delivered is
included with the items.
o When received, the company matches the received
items against the original purchase order to verify that
the correct amount has been shipped.
o As shown in the BPMN diagram, the following
database tables used in this process are the same
tables used when placing a purchase order.
325
Receive Item Business Process Map
- VENDOR table
- ITEM table
o After verifying the items received against the purchase order, the
company records the items in its accounting system, and the
database tables are updated.
o A receiving report is generated and is forwarded to the accounting
department for use in verifying payment.
o If there were any discrepancies between the items received and the
PO, the vendor is notified and these exceptions are recorded.
326
Vendor Module: Receive Items Flowchart
327
Enter Bills Business Process Map
o Typically, vendors mail the bill separately from the

items shipped. After receiving the vendor's bill, the
company uses a three-way match, comparing the bill
against the receiving report and the PO.
o As shown in the BPMN diagram, the database tables
used include the following:
- VENDOR table
- ACCOUNTS p A y ABLE table
328
Enter Bills Business Process Map
o After verifying the bills with the items received and

the items ordered, the company records the bill in its
accounting system, and the database tables are
updated.
o If there are any discrepancies in the bill, the vendor is
notified and the exceptions are recorded.
329
Enter Bills Flowchart
330
Enter Bills BPMN
331
End of Lesson
ACCT 406
Complied By
&


ACCT 406

Lesson 8
Integrated enterprise systems and Industry 4.0

Learning Objectives
o Understand the features of Enterprise Resource Planning (ERP)

systems
o Review the four internet-related technologies (industry 4.0)
that impact on accounting practices
o Determine the new skills and competencies accountants may
need to master or remain relevant and add value.
Slide 336
What is an ERP?
o An AIS model that enables an organization to automate

and integrate its key business processes.
o ERP systems are multiple module packages that evolve
primarily from traditional manufacturing resource
planning (MRP II) systems.
o The lack of effective communication between systems in
the traditional model is often the consequence of a
fragmented system design process.
o Each system tends to be designed as a solution to a
specific operational problem rather than as a part of an
overall strategy.
Slide 337
Objectives of ERP
o To integrate key business processes such as order entry,

manufacturing, procurement and accounts payable, payroll and
human resources
o To use a single computer system to serve the unique needs of each
functional areas compared to the traditional model where each
functional area or department has its own computer system
optimized to the way it does its daily business
o To combine all the computer needs of each functional area into a
single, integrated system that assesses a single database to
facilitate the sharing of information and improve communications
across the organization.
o To support a smooth and seamless flow of information across the
organization by providing a standardized environment for a firm’s
business processes and a common operational database that
support communication
Slide 338
The Traditional Information System
Slide 339
Features of ERPs
o Multiple module software packages

o Emerged as a solution to integration needed for
information transfers across organizational
boundaries which was lacking in stand-alone systems
but required for the trend in AIS
o ERPs are not custom packages designed for a
specific organization
o They are generalized systems that incorporate the
best business practices in use
Adoption of ERPs by Organizations
o To assemble ERPs a mix of pre-coded software

components need to be matched to meet the
business requirements
o To take full advantage of an ERP, an organization may
have to change the way it conducts its business or
modify the ERP to suit its business or more likely
modify both
Slide 341
Core Functions of ERP
o Two general groups of applications characterized an ERP

functionality
- Core applications or online transaction processing (OLTP)
- Business analysis
o Core applications are those applications that operationally
support the day-to-day activities of the business.
o They are core because their failure result in the entire
business failure.
- E.g. sales and distribution, business planning, production
planning, shop floor control and logistics
o Business analysis applications are either obtained or derived
and central to their successful function as data warehouse
Slide 342
ERP System
Slide 343
OLTP Server
o Supports mission-critical tasks through simple

queries of operational databases
o Customer table
o Invoice table
o Line-item table
Slide 344
OLAP Server
o Support management-critical tasks through

analytical investigation of complex data associations
that are captured in data warehouses.
o Support common analytical operations
- Consolidation
- Drill-down permits
- Slicing and dicing
Slide 345
Bolt-on Software
o Arises as a result of the ERP not driving all the

processes of the company
o Provided by third party vendors
o Choose a bolt-on endorsed by the ERP vendor
Slide 346
Data Warehouse
o A relational or multidimensional database that supports

online OLAP
o A database constructed for quick searching, retrieval, ad
hoc queries, and ease of use.
o Data are normally extracted periodically, from an
operational database or from public information service
o The process involves extracting, converting and
standardizing an organization’s operational data from
ERP and legacy systems and loading it into a central
archive
Slide 347
Stages in Data Warehousing
o Modelling data for the data warehouse

o Extracting data from operational database
o Cleansing extracted data
o Transforming data into the warehouse model
o Loading the data into the data warehouse database
Slide 348
Successful Data Warehouse Implementation
o Installation of processes for gathering data in an

ongoing basis
o Organization of data into meaningful information
o Delivery of data for evaluation
Slide 349
ERP Implementation Risks
o Big bang and phase-in approach

o Opposition to changes in the business culture
o Choosing the wrong ERP
o Choosing the wrong consultant
o High cost and cost overruns
o Disruptions to operations
Slide 350
Internet-Related Technologies
o Rapidly transforming the digital economy and industry (now in

its fourth revolution – industry 4.0) include:
- Cloud computing
- Big data
- Blockchain
- Artificial Intelligence
o These have raised concerns about the future of the accounting
profession.

The Accounting Profession & IT
o The Accounting Profession – 3 key questions

- How can accountants continue to add value to organizations
- Where can accountants work
- What data do they have to work with
o Redefinition and expansion
o Next generation manufacturing systems (industry 4.0)
underpin by these technologies.
o Data analytics, data visualization, storytelling, and strategic
management are skills that accountants need to develop.

Cloud-Based Technology
o Available in a range of key functions

o Are recognized as part of the accountant’s role
o Four possible cloud deployment models include:
- Public cloud
- Private cloud
- Community cloud
- Hybrid cloud
o Public server cloud services has received significant
attention
Slide 353
The Public Cloud Model
o Public server – received the most investments

o Sold on a pay-as-you-go basis to multiple tenants
o Allow for a multi-cloud deployment strategy
Slide 354
Desktop Computers Vs Cloud
o At least 5% of SMEs in the US abandoned desktop accounting

software in favor of cloud-based accounting software
o In New Zealand and other countries, the SME adoption rate is
over 30%
o In the UK every four in five UK organizations use at lease one
cloud-based service.
o Approximately 65% of UK accountancy practices are already
using or planning to use cloud accounting software

Advantages of the Public Cloud Model
o Bills based on usage of cloud services hence can monitor and

control resource usage.
o Multi-tenancy agreements operations.
o Required time to roll out cloud apps across organizations that
operate with subsidiaries in multiple jurisdictions is
significantly reduced.
o Pre-packaged nature of much of the software available for
purchase in cloud avoid problems of integration and
reconciliation of accounts associated with the previous system
Slide 356
o Provider rather than user of cloud services is responsible for the

equipment and its maintenance.
o Using cloud means that organizations pay only for usage leaving
more funding for other initiatives.
o All cloud systems benefit from improvements to software or security.
o Compared with on-premise ERP systems, cloud delivery allow
accountants to spend less time backing up their data.
o Compared with on-premise ERP systems, cloud delivery allow
accountants to spend less time backing up their data
Slide 357
o Access to information in real time using apps that can be

downloaded on smart devices.
o Cloud providers are developing mobile apps that enable
managers to review and approve invoices no matter where
they are.
o Cloud can benefit relations with suppliers by providing work
space to share information.
Slide 358
Accounting in the Cloud
o Provides real-time access to financial data from any mobile

device.
o Add-ons to standard cloud accounting software also allow
enhanced functionality such as forecasting and external
benchmarking
o Such features not only enable better planning and control but
also improve financial reporting by automating and
streamlining tasks associated with statutory reporting
requirements.
o Cloud accounting improves internal and external audits.

Cloud Based Accounting
o Cloud accounting provides access to and analysis of data in

near real-time. This enables timely detection of anomalies
o Cloud accounting offers unprecedented data sharing abilities
and mobility.
o Cloud based systems benefit accountants by enabling them to
track business performance without having to contact the
client leaving the client to focus on other value-added
activities.
Slide 360
Big Data
o high-volume, high velocity and/or high variety information assets

that demand cost effective, innovative forms of information
processing that enabled enhanced insights, decision-making, and
process automation.
o Data may be structured or unstructured.
o Unstructured data comprised information sourced from social
media, videos, wireless machines sensors, etc. eg Cookies are
used in websites to track the products and services customers
consider for purchase, which provides a wealth of new
unstructured information about individual customer preferences.
Slide 361
Big Data
o The big data phenomenon has been facilitated by the internet

of things (IoT) – the proliferation of sensing technologies
enabled by wireless networks to measure and gather
environmental indicators.
o self-sensing and self-acting devices used in smart factories,
logistics, transportation (e.g. autonomous vehicles), military,
law enforcement, medicine, and households (appliances,
wearables), generate vast amount of data.
Slide 362
Big Data
o The unstructured nature of much of this information and the

need to integrate it with structured data requires new forms
of management and analysis
o Approximately 87% of 2,000 Chief Financial Officers and
Finance Executives view big data as likely to transform the
way business is done in the next ten years.
o Currently big data is used by large companies including
internet and retail.
Slide 363
The Role of Accountants in Using Big Data
o To be relevant accountants need to develop expertise in

interpretating and utilizing data analytics.
o Understand the full-circuited knowledge system
o Accountants’ skills in problem-driven analysis of structured
data positioned them to work with unstructured data and to
integrate them with structured data so actionable strategies
can be developed and accomplished.
Slide 364
Data and Auditing
o Traditional auditing tools use

- Text-mining techniques to analyze company disclosure
- Conference call transcripts to estimate probability of
misstatements
o Other opportunities arise as more data becomes available
- Data from radio frequency identification chips can be
used to verify inventory
- Data from news articles, product discussion forums, and
social networks may be used to evaluate sales
Slide 365
Big Data and Auditing
o Big data visualization impact the audit process

- Eg study from 127 auditors from two big 4 firms
o How big data is created by professional organisations to
change client perceptions of the profession rather than how
big data is being used inside organisations to improve decision
making.
- Eg how social media (Facebook, LinkedIn and Twitter) and
social media experts used by professional organizations
such KPMG, EY etc to reconstitute accounting work.
Slide 366
Blockchain
o Blockchain technology is a type of distributed ledger

technology where multiple copies of the same ledger are
shared among the members (nodes) of a large network.
o Once a transaction is approved by the nodes in the network, it
cannot be reversed or re-sequenced.
o This inability to modify a transaction is essential for the
integrity of blockchain and ensures that all parties have
accurate and identical records.
o Because blockchain is a distributed system, all changes to a
ledger are transparent to all the members of a network
Slide 367
Blockchain
o Blockchain technology provides a mechanism to create ‘trust’

among unknown members of a network without the need for
a trusted third party (a central authority), such as an
organisation (e.g., bank) or intermediary (e.g., notary).
o Commentaries on blockchain suggest that the technology will
transform many industries, including banking, insurance,
media, energy, and public services by using automation to
lower the cost of transacting.
Slide 368
Blockchain Technology and Accounting
o Blockchain is also expected to disrupt the accounting

profession (Kokina, Mancha & Pachamanova, 2017).
o Have implications for the design of accounting information
systems, auditing and assurance
o First, Blockchain permits triple-entry bookkeeping, where
every transaction leads to three entries to record the debit,
the credit, and the cryptographic signature to verify a
transaction's validity
o Self-assuring accounting ecosystem based on blockchain,
smart contracts and IoT can work.
Slide 369
Artificial Intelligence (AI)
o AI is used by many practitioners and organisations such as EY

and Deloitte to detect fraudulent invoices and to assist with
tax returns, reducing processing time from months to days
o Some professionals such as those working in management
accounting have suggested that accountants' skills are
inadequate for addressing AI requirements.
- Eg, Krumwiede (2017) reports from a survey of
management accountants that many feel they have a
broad understanding of AI but lack the skills to add value
to work in this area.
Slide 370
AI and Accounting
o AI is used in auditing for tasks such as classifying collectable

debts versus bad debts or evaluating internal control risks.
- E.g. using neural networks to predict the going concern
status of firms.
- The predictability of future earnings from the tone of
forward-looking-statements
- The detection of financial statement fraud
Slide 371
End of Lesson
ACCT 406
Complied By
&


ACCT 406
Lesson 9
Accounting and Business Intelligence
UNIVERSITY OF GHANA BUSINESS SCHOOL

2019/2020
o Reflect on the three types of decision making in an

organization
o Understand what business intelligence (BI) is and know
its components
o Identify the four common components of an integrated
enterprise system
o Understand the steps in the decision making process
Business Intelligence (BI) Technologies
o BI technologies include analytics, data mining, and predictive

modeling.
o They are typically under the control of the enterprise's IT
professionals.
o An intelligent enterprise system may use one or both types of
Bl.
- Shadow data
- Both shadow data and BI technologies.
376
Three Decision Types within Organizations
o Routine operational decisions (structured decisions)

o Tactical decisions (semi-structured decisions)
o Strategic decisions (unstructured decisions)
377
Operation Decisions
o Routine operational decisions are recurring and typically

relate to ongoing business operations.
o After a routine decision is made once, the same decision can
be applied until the environment or business operation requires
reevaluation.
o An example of a routine decision would be the most cost
effective shipping procedure.
o Routine operational decisions are also called structured
decisions, and they have the least ambiguity.
378
Tactical Decisions
o Tactical decisions are typically short term, impacting one year

or less.
o Examples of tactical decisions are outsourcing and special
orders.
o These decisions are considered semi-structured, with more
ambiguity than routine decisions but less ambiguity than
strategic decisions.
379
Strategic Decisions
o Strategic decisions are usually long term in nature and

unstructured with a high degree of ambiguity.
o Examples of strategic decisions include mergers and acquisitions,
diversification, and divestiture.
380
Integrated Decision Model
o IDM consists of seven basic steps as a framework for the

decision-making and evaluation process.
- Define the opportunity or issue.
- Identify options to address the opportunity or issue.
- Analyze quantitative (financial) factors.
- Analyze qualitative (nonfinancial) factors.
- Make recommendation and/or decision with supporting
rationale.
- Implement decision.
- Evaluate performance
381
IDM
382
Define the Opportunity or Issue
o What is the core issue or opportunity?

o Make certain you have identified and are addressing the core
issue rather than a symptom.
o For example, is the issue a sudden drop in sales? Or is the
issue the decline in product quality that caused the sudden
drop in sales?
Identify Options to Address the Opportunity
or Issue
o What are the options to address the issue?
o Use creative solutions and brainstorming techniques to identify
options that turn challenges into opportunities.
o A combination of options should also be considered.
o For example, assume you identify two options:
- Option 1 is to increase the sales force;
- Option 2 is to increase advertising expenditures.
- A third option might be to combine Option 1 and Option 2
to increase the sales force and increase advertising
expenditures but at a lower level than in the other options.
384
Analyse Quantitative (Financial) Factors
o Collect financial information for each of the alternatives.

o As you collect information, other options may become
apparent.
o Revisit step 2 if necessary and then proceed.
o Quantitative analysis may consist of cost-benefit analysis,
cost-volume-profit analysis, capital budgeting, and more.
o Basically, you are attempting to compare the financial costs
and benefits of each option and determine the differences
Analyse Qualitative (Non-Financial) Factors
o Have you ever purchased a product that is not the lowest cost
alternative? Why?
o Nonfinancial factors can often influence a decision.
o Step 4 is to gather nonfinancial information for each option to
address qualitative factors, such as
- product quality,
- timeliness,
- the stress factor,
- streamlining,
- ease of use,
- overall satisfaction, and so on.
Qualitative Analysis
o Basically, you list qualitative factors for each option,

categorizing the factors as advantages or disadvantages.
387
Make Recommendation and/or Decision with
Supporting Rationale
o After considering the quantitative and qualitative analysis for
each option, arrive at a recommendation and concisely state
your supporting rationale.
o The recommendation should be clearly stated, but caveats
based on changing circumstances are acceptable so long as the
decision maker is given a clear course of action.
o As accountants, we are often asked to make recommendations
to management, but management makes the final decision.
388
Implement Decision
o Take action. Operationalize the decision using the appropriate

people and resources.
389
Evaluate Performance
o Obtain feedback about the performance resulting from the

decision.
o Did you meet your estimated targets? If not, why not?
o Use this information to make appropriate adjustments such as
modifying your future estimates or better controlling
operations and implementation.
390
Summary of IDM
Integrated System Components
o The four common components in an intelligent enterprise

system are:
- Data storage
- Data extraction and transfer
- Data analysis
- Data visualization
o The components work together to analyze multidimensional
data cubes and identify meaningful interrelationships.
o These meaningful relationships can provide insights for more
intelligent business decisions.
Multidimensional Data Cube
Data Storage
o Data is stored using operational databases, data warehouses, and
other data storage.
o Data from recurring transactions and operations is stored in an
operational database.
o Data from the operational database and other sources may be
loaded into a data warehouse.
o The data warehouse is a large database that serves as a central
location for aggregating and storing an enterprise's data.
o When an organization uses a data warehouse, data is often
transferred from various sources throughout the organization,
including the operational database, spreadsheets, and company e-
commerce Web sites, into the data warehouse where the data is
integrated
Data Extraction and Transfer
o Data extraction and transfer tools are used to extract data

stored in databases (operational databases and data
warehouses) and transfer the data into data analysis tools.
o The operational database that is well suited for storing data is
not well suited for data analysis.
o It is necessary to transfer the data from the operational
database into an analysis tool.
o The exact steps for data extraction and transfer may differ
based upon the intelligence tool used; however, the process is
basically the same.
Data Analysis
o Data analysis tools are used to analyze data to identify

interrelationships and insights that can be used to create
intelligence for better business decisions.
o The data analysis includes two approaches to BI: shadow data
and BI technologies.
o Data analysis can be performed using statistical, mathematical,
financial, and data mining functions.
396
Data Visualization
o Visualization tools include user interface applications that display
results of the data analysis on the user's computer.
o For example, shadow data might use a spreadsheet display. A BI
technology might display results using OLAP (Online Analytical
Processing) cubes that permit the user to view data from various
multidimensional perspectives.
o Tools for visualizing the results in an understandable, user-friendly
form can consist of charts, graphs, figures, tables, and cubes.
o These tools are sometimes combined to create digital dashboards.
o The digital dashboard is often interactive, permitting the viewer to
see the effect of changes in various scenarios, parameters, and
variables.
397
End of Lesson
Lesson 10
ACCT 609: Accounting Information Systems
Dr. Aboagye Otchere & Dr. Edward Nartey

FRAUD, COMPUTER FRAUD AND
INTERNAL CONTROLS
Learning Objectives

o Understand the fraud triangle from both the IT
professional and accounting professional perspective
o Explain internal control and the COSO framework of
internal control
o Explain the significance of IT control and its
components
401
What is Fraud?
o Deliberate, illegal, deceptive event which causes

damage to others for the fraudster’s benefit.
o For fraud to be perpetrated, three conditions must
exist as depicted by the fraud triangle
- Motive
- Opportunity
- Means
402
The Fraud Triangle
403
Fraud Triangle (MOM & IOR)
o IT professionals refer to the fraud triangle as motive,

opportunity, means (MOM)
o Accounting professionals refer to the fraud triangle
as incentive, opportunity, rationalization (IOR)
404
MOM
o Motive – the perpetrator must have motive ie reason

for committing the fraud (e.g. financial difficulty)
o Opportunity – the perpetrator must have the
opportunity i.e. access to asset or financial statement
in order to carry out the fraud
o Means – the perpetrator must have the means to
carry out the fraud ie knowledge or skills that permit
the perpetrator to commit the fraud
405
Occurrence of Fraud
o For fraud to occur all three conditions (motive, opportunity,

means) must be present
o Motive and opportunity without means will not result in
fraud because the potential fraudster has no means of
committing the fraud.
o Opportunity and means without motive will not result in
fraud because the individual is not motivated to commit
fraud
o Motive and means without opportunity will not result in
fraud, because even though the potential fraudster is
motivated to commit fraud and has the means to do so, the
individual does not have an opportunity.
406
Types of Fraud
o The Association of Certified Fraud Examiners

(ACFE) classifies occupational fraud into three
general categories:
- Corruption
- Misappropriation of assets
- Fraudulent financial reporting
407
Corruption
Corruption includes illegal acts such as bribery,

kickbacks, money laundering and rigging bids.
408
Misappropriation of Assets
Misappropriation of assets involves theft of assets for

personal gain. Cash, inventory, and intellectual property
are often top targets for theft.
409
Fraudulent Financial Reporting
Fraudulent financial reporting includes misstating

financial statements to meet earnings targets. Examples
of fraudulent financial reporting are overstating
revenues, understating expenses, and failure to disclose
pertinent information.
410
Fraud Facts
o Most occupational frauds are committed by the

accounting department (29% of cases) or upper
management (19%) (ACFE, 2012)
o The typical fraud lasts two years before it is detected
o Forty-six percent of fraud are detected by tips which
is the most likely means of detection
o In 35% of the cases, inadequate internal controls
have been cited as a primary contributing factor.
411
Why Does Fraud Occur?
o Two top reasons account for this

- Pressure to meet goals (81%)
- Personal gain (72%)
412
Fraud Risk Management
o Five principles have been identified to establish an

environment to manage fraud risk effectively
- Principle 1 – fraud risk governance
- Principle 2 – fraud risk assessment
- Principle 3 – fraud prevention7
- Principle 4 – fraud detection
- Principle 5 – fraud investigation and corrective
action
413
Controls
o Key components of effective fraud risk management

to prevent, detect, and correct fraud.
o These controls attempt to detect and prevent both
intentional errors (such as fraud) and unintentional
errors (such as mistakes)
414
Prevent
o Controls are designed to prevent or reduce the

likelihood of a fraud occurring.
o This includes controls to prevent errors from
occurring
o An example of a preventive control would include
restricting employee access to some parts of the
accounting system and requiring an employee user ID
and password to log into the system.
415
Detect
o Controls designed to discover fraud when it occurs

and alert management.
o The purpose of detective controls is to detect if an
error or issue occurs in your accounting system.
o An example of a detective control is conducting a
physical inventory count on a regular basis to verify
that the items on hand agree with the number of items
recorded in the accounting system.
o This detective control helps to detect inventory
shrinkage (missing inventory) possibly due to theft.
416
Correct
Investigate and take corrective action to remedy harm

caused. Sometimes this step is referred to as respond
instead of correct.
417
Earnings Management & Fraud
o Often in accounting scandals, accounting numbers are

misstated to make the company’s financial performance
appear better than it really is.
o Earnings management focuses on managing when
revenues and expenses are recorded in order to favorably
reflect a company’s financial performance in a legal manner.
o Where is the line between earnings management and
fraud? Fraud is earnings management gone amuck.
418
o The 2012 ACFE report on occupational fraud and abuse found

that in 81% of cases, the fraudster displayed one or more
behavioral warning signs. Top behavioral red flags of
fraudsters were:
- Living beyond means (36% of cases)
- Financial difficulties (27% of cases)
- Unusually close association with vendors or customers
(19% of cases)
- Excessive control issues, unwillingness to share duties
(18% of cases) (acfe.com, 2012)
419
The challenge for you as an accounting professional is to

safeguard the information assets in the accounting system,
utilizing security and controls, as well as understanding
behavioral aspects of fraud so you can identify and investigate
red flags before it's too late.
420
What is SOX?
o The millennium began with the Enron accounting

scandal in October 2001.
o Enron CEO Jeffrey Skilling was convicted and
sentenced to 24 years in prison for:
- Conspiracy
- Securities fraud
- Insider trading, and
- Lying to auditors (businessweek.com, 2009).
o Enron's many accounting problems led to its collapse.
421
SOX Requirements
o Section 302: Corporate responsibility for financial

reports
o Section 404: Management assessment of internal
controls
o Section 806: Protection for employees of publicly
traded companies who provide evidence of fraud
o Section 906: Corporate responsibility for financial
reports
422
Internal Control
» Internal control: the measures an organisation

employs to help attain the objectives of efficient
operations, reliable reporting and compliance with
relevant laws.
» Essential to an organisation’s corporate governance
structure.
423
Internal Controls
o A set of policies, procedures, and activities to achieve

an organization’s objectives related to the following:
- Effective and efficient operations.
- Reliable financial reporting, preventing and
detecting both intentional errors (fraud) and
unintentional errors (mistakes).
- Safeguard assets including information assets
associated with the accounting system.
- Comply with applicable laws and regulations.
424
Effective Internal Controls
o For internal control to be effective, an organization

needs both:
- Stated policies and procedures for internal
controls, and
- Compliance with internal controls (individuals
comply with or follow the policies and procedures)
425
Five Categories of Internal Control
There are five major categories for internal control.

o Control environment
o Risk assessment
o Information and communications systems relevant
to financial reporting
o Control activities
o Monitoring of controls
426
COSO’s Framework
COSO definition of internal control:

o The definition is deliberately broad and reflects the
following fundamental concepts:
- Geared towards achieving objectives in one or
more categories: operations, reporting and
compliance
- A process of ongoing tasks and activities — a
means to an end, not an end in itself
427
COSO’s Framework
- Effected by people — this is not just about

policies and procedures but about people and
their actions
- Able to provide reasonable assurance (not
absolute assurance) to the board and
management
- Adaptable to the organisation’s structure, for
the whole organisation, a subsidiary, a division
or a business process.
428
COSO’S Framework
• The COSO framework outlines three key control

objectives for internal control:
• Operations objectives: effectiveness and
efficiency of business operations.
• Reporting objectives: the internal and external
financial and non-financial reporting obligations of
an organisation.
• Compliance objectives: adherence to laws and
regulations to which the organisation is subject
429
Components of the COSO Internal Control
Framework
» Components of control are defined by the control
framework
– For example, COBIT 5 and COSO (financial
controls).
– Consist of five integrated control components
430
Components of the COSO Internal Control
Framework
» For the three control objectives to be achieved, there
are five integrated control components:
1. the control environment
2. risk assessment
3. control activities
4. information and communication
5. monitoring.
431
COSO’s Internal Control Framework: Control
Environment
» Control environment is the basis for all internal

control practices and impacts operation.
» There are five COSO principles for the control
environment.
» If the control environment is weak, the internal
control system are less reliable.
432
COSO’s Internal Control Framework: Risk
Assessment
» Risk assessment assesse the various risks that could

inhibit the successful attainment of objectives.
» Four COSO principles relating to risk assessment
» Risk assessment process includes whether the entity
has a process for:
(i) identifying risks which threaten achievement of
control objectives
(ii) estimating the significance of the risks
(iii) assessing the likelihood of their occurrence
(iv) deciding about actions to address those risks.
433
COSO’S Internal Control Framework: Control
Activities
» Control activities:
– Preventive or detective and manual or automated.
– Maintain security, confidentiality, privacy and data
integrity.
– Identify risks and reduce threat:
▪ Top-level reviews, physical controls and
segregation of duties.
» COSO three principles relating to control activities
434
COSO’S Internal Control Framework:
information and communication
» Information from internal and external sources to
support the components of internal control.
» COSO principles for information and communication.
» The design of the information system, such as
infrastructure, software, people, procedures and
data.
» Information must also be communicated to the
relevant people for appropriate action
435
Monitoring
o Monitoring of the internal control system needs to
occur regularly.
- COSO Framework
- Internal auditors:
▪ The Institute of Internal Auditors Ghana.
o External or independent auditor
– Audit the effectiveness of internal control over
financial reporting and financial statements
– May use the COSO framework as part of the
independent audit
436
Monitoring
» Senior Management have a role to play
» The COSO framework
– Accountable for internal control
– Responsible for assessing the organization's system of
internal control
437
IT Governance
» Information technology (IT) governance is a subset

of corporate governance
» IT investment is significant and increasingly being
incorporated into organisations.
– Simple: websites, basic e-commerce and electronic
communication systems.
– Advanced: enterprise resource planning systems.
438
What is IT Governance?
» IT governance centres on ensuring IT is used in a

manner consistent with the organisational strategy.
» The international standard, ISO/IEC 38500:2015
Information technology — Governance of IT for the
Organisation:
– Guiding principles for those responsible in organisations
(owners, directors, partners, executive managers and
others) for the effective, efficient and acceptable use of
information technology within their organisations.
439
» The standard implies that management should take

responsibility in three key areas:
1. Agenda setting for IT integration into the
overall business strategy
2. Ensuring an appropriate level of investment in
IT business capability
3. Successful operational use of IT in routine
business activity.
440
» The bottom line is that IT governance should provide

assurance that, first, IT investments generate the
required business value, and second that any risks
associated with IT are mitigated.
441
What are IT controls?
o There are three zones in the house of IT controls

- Top management: entity-level IT controls
- Business processes: application controls
- IT services: IT general controls
o IT controls can be grouped into
- Application controls
- General IT controls
442
Responsibility of Audit Committee
o The audit committee's responsibilities include the

following:
- The integrity of the organization's financial
statements and reports
- The organization's internal controls
- The organization's compliance with legal and
regulatory requirements
- The organization's policies regarding ethical
conduct
443
Application Controls
o Application controls are controls embedded

within business process applications.
o Technology plays such an integral role in performing
business processes today.
o Applications, such as accounting software, require
application controls to ensure that financial reporting
control objectives are achieved.
o Integrated enterprise systems, such as SAP and
Oracle, include application controls within the
financial applications of the integrated system.
444
o Application controls ensure completeness and accuracy

of transaction processing, authorization, and validity.
Such controls are intended to support control objectives
of the following:
- Completeness: All transactions and accounts that
should be presented in the financial statements are
included.
- Accuracy: This refers to the accuracy of processing
transactions as well as accuracy of accounts and
information presented in the financial statements.
445
- Authorization: Transactions are recorded in

accordance with authorization of management.
- Existence: Assets and liabilities exist at the given
date and recorded transactions occurred during a
given period.
- Disclosure: Processes are in place to ensure that all
material information is disclosed in required reports
and that disclosure is authorized, complete, accurate,
and timely.
446
Application Control Classification
o One way to classify application controls is by the

control objectives specified in the COSO internal
control framework:
- Operations make effective and efficient use of the
entity's resources.
- Financial reporting produces reliable financial
statements.
- Compliance with applicable laws and regulations
is achieved.
447
o To correspond to the COSO control objectives,

application controls can be classified as follows:
- Operational controls, such as controls to manage
timing of cash disbursements to assure all discounts
are taken and finance charges and late fees avoided
448
- Financial controls, such as controls to ensure that

external financial reports are prepared on a timely
basis in compliance with applicable laws,
regulations, or contractual agreements
- Compliance controls, such as controls to maintain
confidentiality of information in accordance with
all applicable laws and regulations
449
o Manual controls
o Automated controls
o Hybrid controls
450
IT General Controls
o IT general controls typically include the following

four categories:
- Program development controls
- Program change controls
- Computer operations controls
- Access security controls
451
Example of Purchasing Controls
Purchasing Cycle Application Control Objectives

Purchasing Cycle Application Control Objectives
Process Purchases
Order items meeting specifications
Receive items ordered on a timely basis
Record authorized purchase orders completely and accurately
Prevent unauthorized use of purchase orders*
Process Accounts Payable
Accurately record bills on a timely basis for all authorized and accepted purchases
Accurately record returns and allowances for all authorized credits
Ensure completeness and accuracy of accounts payable
Safeguard accounts payable records
Pay Bills
Manage timing of cash disbursements
Disburse cash only for authorized purchases**
Record cash disbursements completely and accurately
452
End of Lesson
ACCT 406: Accountiing Information Systems
Dr. Aboagye Otchere & Dr. Edward Nartey

Lesson 11
Cybersecurity
By the end of this lecture students should be able to:

o Identify the ten domains of cybersecurity
o Explain each of the 10 cybersecurity domains
Slide 456
Identify the 10 domains of cybersecurity
Slide 457
Cybersecurity 10 Domains
o 10 domain Common body of knowledge for IT

security and control – International Information
Systems Security Certification Consortium (ISC)
Slide 458
Domain Domain Description

Legal, regulations, compliance, Focusses on cybercrime and
and investigations cyber Law
Information security and risk Focuses on preventive and

management proactive policies and
procedures to secure
information assets.
Security architecture and design Addresses security for IT
architecture
Slide 459
Telecommunications, network, Addresses security for data

and Internet security transmissions.
Access control Addresses security for access to
computers,
networks, routers, and databases.
Operations security Refers to activities and procedures
to keep IT
operations running securely.
Physical and environmental Addresses physical security of
security facilities and IT
components (hardware and
software).
Slide 460
Cybercrime 10 Domains
Application security Addresses security and control

for application software, such
as accounting and spreadsheet
software.
Business continuity and Addresses backup and disaster
disaster recovery recovery plans.
Cryptography Focuses on encryption as a tool
to secure data during
transmission and storage
Explain each of the 10 cybersecurity domains
Slide 462
What are Cyberlaw and Cybercrime?
o Cybercrimes are crimes connected to information

assets and IT.
o Cyberlaw relates to the laws and regulations to
prevent, investigate, and prosecute cybercrimes.
Slide 463
Cyberattacks
o Some of the more well-known cyberattacks are

- Salami
- social engineering, and
- dumpster diving.
Slide 464
Salami
o Salami attacks, also known as skimming, usually target

the accounting department.
o Salami attacks are typically for very small amounts over
numerous accounts that accumulate into significant sums.
o A common example of salami attacks is rounding
additional digits in an interest calculation into the
attacker's own account.
Slide 465
Social Engineering
o Social engineering attacks involve manipulating and

tricking an individual into divulging confidential
information to be used for fraudulent purposes.
o As an example, attackers might send out emails
posing as the company IT department. request that
you email back your password and ID in order to
reset your account.
o The attacker then uses the information to hack into
the company system.
Slide 466
Forms of Social Engineering
o Pretexting, a form of social engineering, is the act of

creating a scenario and using deception for
information gathering fraud.
o For example, because companies typically require
only minimal or no client authentication, it is possible
for an attacker to impersonate a client. If successful,
the attacker can then ask questions to extract
information from the company about the client.
Slide 467
Phishing
o Phishing is another type of social engineering to

fraudulently obtain confidential information, such as
financial data.
o The attacker fishes for sensitive, private data. An
example of phishing is an attacker sending you an
email stating that your account will be suspended
unless you update your information.
Slide 468
Phishing
o The link provided in the email takes you to the

attacker's Web site, constructed to appear legitimate,
where you are asked to update confidential
information. If you enter your information into the
Web site, the attacker then uses the information for
fraudulent purposes.
Slide 469
Dumpster Diving
o Dumpster diving refers to rummaging through garbage

for discarded documents or digital media.
o The disposal area is often not as closely guarded as office
and IT areas, offering easy access.
o While dumpster diving is unethical, it may not be illegal.
o An example of dumpster diving is collecting or buying
discarded computer hardware and then extracting data
left on the media.
Slide 470
Dumpster Diving
o Even if data has been deleted and the drives

reformatted, data can still be extracted.
o Special wiping software can be used to eliminate any
trace of the data, or the hard drive can be permanently
disabled by using a power drill to physically drill
through it.
Slide 471
Password Sniffing
o Password sniffing involves attempts to obtain

passwords by sniffing messages sent between
computers on the network.
o Do you use a hotel lobby computer when you travel?
If you enter your password to access financial Web
sites, such as your bank or brokerage accounts, your
password is at risk for password sniffing.
Slide 472
Cyberlaw
o Laws related to cybersecurity originate from

- Legislation
- Regulations, and
- Case law.
Legislation
o Examples of legislation affecting cybersecurity

include the following:
- Sarbanes-Oxley (SOX)
- Health Insurance Portability and Accountability
Act (HIPPA)
- Grarnm-Leach-Bliley Act of 1999 (GLBA)
- Computer Fraud and Abuse Act
- Federal Privacy Act of 1974
- Basel II
Slide 474
Legislation
- Payment Card Industry Data Security Standards (PCI-DSS)

- Computer Security Act of 1987
- Economic Espionage Act of 1996
- Employee Privacy Issues
- Federal Information Security Management Act of 2002
(FISMA)
- Dodd-Frank Wall Street Reform and Consumer Protection
Act
Slide 475
Cyber Forensics
o Cyber forensics involves collecting, exammmg, and

preserving evidence of cybercrirnes.
o Typically, organizations do not have an in-house
cyber forensics team. Most of the time, organizations
tum to law enforcement, regulatory agencies, and
outside consultants to conduct cyber forensics
investigations.
o For example, when Heartland became aware of a
cybersecurity issue, the company hired an outside
consultant to investigate.
Slide 476
Information Security and Risk Management
o Cybercrimes grab headlines about hackers, identity

theft, and stolen credit card numbers.
o This domain, information security and risk
management, consists of the preventive and proactive
measures taken to prevent the hacker headlines from
happening.
Slide 477
Information Security and Risk Management
o Information security consists of the policies and

procedures required to secure information assets,
including IT hardware, software, and stored data.
Information risk management is part of the larger
enterprise risk management (ERM) framework
covered in the next chapter.
o Fundamental principles of information security
include confidentiality, integrity, and availability
(CIA).
Slide 478
Confidentiality
o This security principle ensures that sensitive data at each

point in information processing is secure and protected
from unauthorized access.
o A confidentiality breach can result in disclosure of
sensitive information, such as credit card numbers or
Social Security numbers.
Slide 479
Integrity
o Data integrity is a security principle that ensures data

is accurate and reliable.
o Lack of data integrity is caused by data alteration,
which can occur at any stage in information
processing.
o Data can be altered when entered, transmitted, or
extracted.
Slide 480
Availability
o This security principle provides an acceptable level of

performance so that required data is available as
needed by the organization's users, such as its
accountants.
o If data is destroyed by malicious malware, security
measures should ensure the system recovers from
disruption so data is available for users.
Slide 481
Information Classification – Industry/Private
Sector
o Information sensitivity classification for the private

sector include the following
- Confidential
- Private
- Sensitive
- Public
Slide 482
Information Classification – Government
o Information sensitivity classification for use includes

the following categories
- Top secret
- Secret
- Confidential
- Sensitive bur unclassified
- Unclassified
Slide 483
Information Security Management
o Involves developing and enforcing security policies,

guidelines, standards, and procedures for
information.
o Three types of information security controls include
- Administrative controls
- Technical or logical controls
- Physical controls
Slide 484
Security Frameworks
o A security framework provides a conceptual

structure to address security and control.
o Security frameworks include the following
- Control objectives for Information and Related
Technologies (COBIT)
- Committee on Sponsoring Organizations of
Treadway Commission (COSO)
- ISO 27000
Slide 485
IT and Computer Architecture
o IT architecture consists of architecture for

computers, networks, and databases
o Computer architecture consists of computer
hardware components and computer software
Slide 486
Network Architecture
o Networks are interconnected computers and devices.
o Network architecture consists of network hardware

and software.
o Network hardware and software interact to provide

reliable communication channels between
computers.
Slide 487
Local Area Network (LAN)
Slide 488
Metropolitan Area Network (MAN)
Slide 489
Wide Area Network (WAN)
Slide 490
Disaster Recovery Plan
Goals
o Minimize disruption, damage and loss from a disaster
o Provide a temporary method for processing business
and accounting transactions
o Resume normal operations quickly

End of Lesson
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ACCT 406

Accounting Information Systems

Dr Aboagye Otchere & Dr Edward Nartey

Overview of Accounting Information Systems

After this lecture, you should be able to:

Describe the nature of information and its flows

o This lecture places the course “Accounting

o Information is processed data:

o Benefit less cost

Example of External users:

Identify the types of systems and heir

» Electronic Data Processing Systems (EDP)

o Is ‘a study of organizations and relationships.

o Systems are structured as mechanistic, functional

o Systems are organic, humanistic and subjective

The term information systems suggests the use of information

Describe a framework for the AIS in relation to

» Because of the highly integrative nature of modern

– is a collection of resources designed to transform data into information

» An AIS can be a paper-and-pencil manual system, a complex system

» So, AIS = information providing vehicle

» By definition, accounting is inherently regarded an information system,

– Identify situations that require action.

o Value Chain includes the set of activities a product or

• Support activities in the value chain augments the primary activities.

Below is a pictorial representation of the value chain process

✓ Business strategy, and

Understand the contextual dimensions of AIS

o Data collection: This is the first operational stage of an AIS.

» revenue cycle: generally consisting of a marketing system, a

– the size of the company,

o Industry standards/regulations and of course,

DISCLAIMER: Presentations merged for convenience. Original content belongs to respective

Dr Francis Aboagye Otchere & Dr Edward Nartey

At the end of this lecture you should be able to:

o Incorrect data can lead to:

Know the role of databases in accounting system

o A database is a collection of related tables.

o Accounting software is often classified into three categories

o A database software application such as an Oracle database is

o Consists of software applications such as accounting

o Is a software used to:

o The DBA is responsible for managing the enterprise’s

o Consists of the user interface that appears on the

Identify database types and database structures

o Used for business intelligence purposes to improve

o Databases containing data collected by other

o Three dimensional with many interrelated tables

o Represents conceptual and external level schemas as

o Stores data in database tables

o Store data in records that are not grouped into

o A parent record can have many child records, and

Know database essentials

o Database records are a collection of related fields, populated

o The unique identifier is called a primary key. For example, in

o A database table is a collection of related records

o In a relational database, the database tables are related or

DISCLAIMER: Presentations merged for convenience. Original content belongs to respective

eacc606_teddyok_MgtAcct&Strategy_EMBA Slide 103

At the end of this lecture you should be able to:

Describe the role of database Forms, database Queries

eacc606_teddyok_MgtAcct&Strategy_EMBA Slide 107

The front-end user interface is served by three database